Finland is a small open economy, and uncertainties in the global economy are also strongly reflected in Finland. The calculations presented here illustrate uncertainties relating to export and GDP forecasts by means of fan charts that demonstrate the uncertainties associated with the external environment. The fan charts incorporate both uncertainties in forecasting external factors and a view of asymmetric risk factors.

Finland's recent brisk economic growth is largely a consequence of the upswing in the global economy. The external environment has always played a decisive role in shaping Finland’s GDP and, in particular, export growth. Changes in the external environment are, however, always surrounded by a high degree of uncertainty.

While the Caucasian and Central Asian (CCA) regions host ethnically and culturally diverse populations, and are difficult to traverse due to the challenging geography, the countries have a long history of political and economic integration. Much of the region was ruled by Timur in the 14th to 16th centuries and, after being separated by Persian invasion in Caucasus and Chinese invasion in Central Asia, the Russian invasion in the 1700’s brought the two again under a shared rule. Subsequently, the CCA became part of the Soviet Union, and the national borders of today were to a large extent drawn during that era as the borders of the Soviet national republics.

The Finnish economy entered a phase of cyclical recovery in mid-2015. After several years of contraction and zero growth, Finnish GDP grew by 1.9% in 2016. Growth has continued to accelerate during the course of 2017. The current cyclical upturn has been supported by growth in exports and investment. Finland’s economy has also benefited from the broader recoveries seen in both the euro area and the global economy.

According to the most recent quarterly national accounts, real GDP in the first quarter of 2015 contracted by 0.1% quarter on quarter but remained unchanged year on year. The quarterly national accounts data signal a broadly similar economic development to the indicator data previously published, i.e. the economy was continuing to contract.

According to the most recent quarterly national accounts, Finland’s GDP in the first quarter of 2017 grew 1.2% quarter on quarter and 2.7% year on year. The data signal similar economic developments for early 2017 as previously estimated, i.e. economic growth is becoming more broadly based. Net exports, in particular, increased, fuelled by a tangible increase in exports. However, GDP growth in the first quarter of 2017 was slightly weaker than suggested by the flash estimate published in May, while GDP figures for the fourth quarter of 2016 were revised upwards. Nevertheless, the Finnish economy has now grown for three consecutive quarters.

On 2 December 2016, Statistics Finland published preliminary quarterly national accounts containing the latest statistical data on Finnish economic developments in the third quarter of 2016.

Russia’s invasion of Ukraine has cast a new veil of gloom over the outlook for Finland’s economy. There is considerable uncertainty over the economic impact of the Russia-Ukraine war, because the extent and duration of the war are not yet known, and neither do we know what economic policy measures will be taken to alleviate the economic effects. Amid this high uncertainty it is nevertheless possible to get an idea of the outlook for the economy by examining different scenarios. In the two scenarios presented here, the war in Ukraine will slow Finland’s GDP growth and increase inflation. In the current year, growth will slow to between 0.5% and 2%. The economic impact will be prolonged if it takes time to find replacements for the lost Russian market.

The Finnish economy started to grow at the end of 2015. This was preceded by an exceptionally long and deep recession, during which the economy contracted for several consecutive years and jobs were lost. Economic growth has continued for three years and the Finnish economy is currently booming. However, growth has passed its cyclical peak. The Bank of Finland's Aino forecasting model demonstrates that both external and domestic factors have influenced the cyclical upswing and, in particular, export growth of recent years.

China was at the forefront of the COVID-19 crisis. As a consequence, the value of Chinese exports plummeted by 13% year-on-year at the first quarter of 2020 (-40% y-o-y in February alone). However, it was not until March when other countries started to impose more or less severe restrictions on economic activity and movement of people. The year-on-year drop in exports was historically bad both for the United States and the euro area in April and May, while Japanese export growth was at its lowest in June.