According to the Confederation of Finnish Industry's October business sentiment survey, Finnish companies expect weaker trends than in the summer. In fact, expectations are as weak as they were during the COVID-19 crisis in spring 2020. Companies' business cycle outlook also continues to decline. While the service sector has been supporting the economy in recent months, the weakness in construction and manufacturing has been evident for some time.
“Based on the latest results, the economic trajectory is similar to the past. The economy is heading towards a recession, with construction and manufacturing leading the way. The service sector is still holding up, but expectations are weakening. The winter will be tough for many businesses, and the number of bankruptcies and restructuring negotiations is likely to remain high in the coming months,” he said. Sami PakarinenBoard member of the Confederation of Finnish Industry.
Construction and manufacturing are scaling back production, and the outlook for the coming months is gloomy. Only the services sector is holding up sales performance. A growing inventory of unsold new homes and clearly lower-than-normal backlogs in manufacturing indicate bigger problems.
“The assessment of economic development is currently heavily hindered by statistical uncertainties. For example, data on housing starts do not seem to reflect the real situation, where construction investment is expected to shrink more than expected. The Finnish economy may be in a worse situation than some statistics suggest. A more accurate picture will emerge and we must be prepared for this,” Pakarinen says.
Lack of demand is the biggest obstacle to growth for Finnish companies. 56% of respondents said that lack of demand is an obstacle to growth. Although issues with labour availability have eased, 18% of respondents still consider labour availability an obstacle to growth. Increasing financing problems in the construction industry are also noticeable.
“Business sentiment clearly points to a slowdown in growth. Even with zero growth, the public debt ratio is expected to exceed 80 percent in 2027. If low growth continues, the debt ratio will reach 100 percent in ten years. It will require a lot of effort to stabilise the debt ratio and put it on a downward trajectory, but this is something that has to be done,” said Sami Pakarinen, executive director at the Confederation of Finnish Industry.
EK Business Trends Survey
The Business Trends Survey is published four times a year by the Confederation of Finnish Industry (EK). The survey has been conducted regularly since 1966. It is part of the European Commission's EU Joint Harmonisation Programme of Business and Consumer Surveys, which is partially funded by the EU. The survey concerns Finnish activities. In October 2023, the Confederation of Finnish Industry asked companies to assess their business outlook for the third quarter of 2023. A total of 1,188 companies employing around 265,000 people in Finland responded to the survey.
