Finland’s economy shrank for a second straight quarter late last year as the fallout from higher interest rates pushed the Eurozone’s northernmost country back into recession.
The country’s gross domestic product (GDP) shrank by a seasonally adjusted 0.4% in the fourth quarter, according to a preliminary estimate from Statistics Finland. In comparison, the country’s GDP shrank by 0.9% in the previous quarter.
The highest borrowing costs in decades are weighing on Finland’s economy, known for its floating interest rates, which reflect hikes by the European Central Bank with minimal lag.
After two years of rapid price growth, consumer spending is no longer able to support the economy, unlike previous downturns. Weak growth in Finland’s export-oriented trading partners, combined with weakness in the housing market, is proving to be a further drag on the economy.
The Scandinavian economy faces a weak outlook for this year, with Finland’s central bank expecting a second straight year of contraction. The country’s biggest mortgage lenders OP Group and Nordea Bank Abp predict the economy will stagnate this year.
The International Monetary Fund said in January it expected growth of 0.5% this year, supported by a recovery in consumption and loosening financial conditions.
