Inflation and higher interest rates brought financial distress to a proportion of households
Due to the higher interest rates, the number of households that considered themselves over-indebted also increased among middle- and high-income households.
Latest articles and blogs
-
Trade war escalation poses significant risk for Finnish economy
A trade war escalation would significantly weaken Finland’s exports and economic growth. By contrast, an easing of trade policy tensions would cause Finland’s exports and economic growth to pick up.
Import tariffs and trade policy uncertainty will dampen economic growth
The United States is planning widespread tariffs on imported goods. If implemented, these would weaken Finland’s economic growth. Even greater harm to growth would be brought by any countermeasures adopted by other countries and they mounting uncertainty over the future direction of international trade policy.
Alternative scenario: Higher interest rates are slowing inflation and economic growth in Finland
In Finland, variable rate mortgages are common, which to some extent is amplifying the impacts of monetary policy on economic growth and inflation. A key factor is the extent to which households have a financial margin to use as a buffer against increases in their loan servicing costs.
Savings help households cope with rising interest rates
For households with outstanding loans, interest payments are now taking a larger slice of their income. Savings and a strong labour market have helped households cope with the rise in the cost of living.
Finnish household debt accumulation follows economic cycle
Over recent decades, Finnish households have constantly accumulated debt in relation to their income. The household DTI ratio is projected to stabilise in the immediate years ahead as the growth in the housing loan stock abates.
Alternative scenario: Supply-side disruptions slow growth also in Finland
In the absence of supply bottlenecks, Finland’s GDP would grow 0.5 of a percentage point faster in 2021. We assume the supply-side disruptions will be smoothed out after 2022, and will not leave long-term scars on the economy.
Consumer confidence foreshadows developments in the economy
Consumer confidence has long been depressed by weak assessments of the outlook for the Finnish economy. Changes in consumer confidence can foreshadow a turning point in the economy and they therefore attract close attention.
Investment weakened by uncertainty and the structure of the Finnish economy
Global uncertainties are weakening investment growth in Finland. A similar effect is being exerted by structural factors in the domestic economy.
Manufacturing is not fostering labour productivity growth as it did before
The pace of labour productivity growth in Finland has faded. This is attributable to lacklustre productivity development in manufacturing as well as the increasing dominance of services in the economy.
Are Finns living beyond their means?
Finns have consumed at levels above their incomes, accumulating more debt than new wealth. Household saving is nevertheless similar to that of the other Nordic countries.