Coronavirus may cause up to 5% decline of Finnish economy: ETLA

The Research Institute of the Finnish Economy (ETLA), a major think tank for economic, policy and social studies, predicted on Tuesday that the COVID-19 pandemic could cause a decline of up to 5 percent in Finland's gross domestic product (GDP).

The institute gave a decline range of 1 percent to 5 percent, but regarded 5 percent as the most likely.

The least decline would materialize, if the pandemic in Europe could be put into control in March-April. It would also require coordinated recovery measures in the EU, according to the ETLA.

In the worst scenario, the Finnish economy would shrink by 10 percent during Q2, but would get back to growth thereafter, according to ETLA. The experiences in China so far formed an underlying key component in the ETLA prognosis.

Aki Kangasharju, the CEO of ETLA, told the media on Tuesday that Europe and Finland are unlikely to resort to as tough virus-blocking measures as China did. Kangasharju, thus, predicted that the crisis in Europe will take longer than in China. "The economy will not be hit that strongly, but the impact of the virus on the economy will be longer."

Kangasharju said on Tuesday that the development in Europe would reflect the progress China has made. "We expect a V format shock, where also our production would begin during Q3 of 2020."

Kangasharju said that even though the shock on Finnish economy now will match the size of the 2008 financial crisis, ETLA does not expect a rerun.

"The corona crisis began outside the economic branch and the health care system has good possibilities of halting the spread of the virus," he said, adding "The financial system is in better condition than 10 years ago and there are fewer unpredictable factors".