Finland slips into contraction

Bloomberg

Gross domestic product fell 1.3 percent from the previous three months, when it shrank a revised 0.3 percent, Helsinki-based Statistics Finland said on its Web site Friday. The economy contracted 2.4 percent from the year earlier.

"Most of the drop is due to the plunge in exports," said Reijo Heiskanen, an economist at Nordea Bank in Helsinki, before the release. "Also, consumption and retail sales fell quite badly at the end of the year."

The global recession is crimping demand for Finnish goods and hurting industry, including Rautaruukki, the nation’s biggest carbon-steel producer. Factory output plummeted 16 percent in December from the year earlier and exports, which account for more than a third of the Nordic nation’s economy, fell an annual 20 percent in November and 15 percent in December.

Sweden, Germany and the U.K., Finland’s main markets in the European Union, are already in recession and Russia, the Nordic nation’s biggest trade partner, is headed for a contraction.

Finland may contract as much as 4.4 percent in 2009, Finance Minister Jyrki Katainen said on Feb. 24. The jobless rate rose to 7 percent in January from 6.1 percent in December. Rautaruukki will shed 460 positions and lay off 3,200 workers temporarily to cut costs.

"The weakness in the economy is spread broadly across sectors," Heiskanen said. "The outlook for the start of the year remains really poor."