Business Environment

Business Environment

The Finnish economy will contract sharply due to the coronavirus pandemic. It is estimated that GDP will decline by about seven per cent in 2020 and grow by around three per cent during the next two years. Macroeconomic forecasts remain uncertain and depend on the progress of the epidemic and how it can be controlled. (Source: Bank of Finland)

Due to the coronavirus pandemic, construction will slacken further. The Confederation of Finnish Construction Industries RT estimates that construction will decrease by five per cent this year and by four per cent in 2021. The slowdown will become evident in construction operations in the autumn, when projects will be pushed back. According to RT, in the worst case scenario, 20,000 jobs might be lost in the construction industry. (Source: Confederation of Finnish Construction Industries RT)

Construction of new housing has been at a record high in recent years, especially in the Greater Helsinki Area, Tampere and Turku. Housing startups will decline by as much as one-fourth this year: it is expected that about 28,000 residential units will be started up, as compared to slightly under 40,000 last year. This slump affects market-financed units in particular. Growth in business premises is also faltering in all the main categories. The greatest fall in volume will be seen in 2021, as the coronavirus pandemic weakens opportunities to invest in commercial construction, hotel projects or industrial buildings, for instance. Hospital construction has contributed to maintaining the volume of public-sector construction at a high level in recent years, but now investments in this sector will most likely wane as well. The state’s stimulus measures brighten the outlook for civil engineering. (Source: Confederation of Finnish Construction Industries RT)

Internal migration still maintains the need for both housing and business construction in growth centres, which are SRV’s strategic focal points. Urbanisation will continue in Finland and construction will increasingly focus on growth centres. (Source: VTT)

In the first months of the year, both Finnish and foreign investors maintained a good level of interest in projects in Finnish growth centres. Apartments have become an increasingly attractive class of property investment in recent years, and interest has remained high. The uncertainty caused by the coronavirus pandemic has slowed down real-estate transactions while also cutting into rental income. The crisis impacts on different real-estate sectors in different ways. (Source: KTI)

The Russian economy has been hit by a double shock – the rouble weakened due to both the collapse of the price of crude oil and the spread of the coronavirus. However, the price of oil has strengthened, and is now at the same level as in early March, while still falling about 40 per cent short of the price at the beginning of the year. Estimates of the trend in GDP vary, but it is generally thought that the economy will contract by 5-6 per cent in 2020 and grow by 3-5 per cent in 2021. The strict restrictions that Russia has imposed to control the coronavirus pandemic are most clearly evident in the retail sector, in which the volume fell by 37 per cent in all non-food products in April. Even though some restrictions have been lifted, it is likely that the volume will continue to contract compared with the previous year. (Source: Bofit)

Half-Year Report 1-6/2020, 21 July 2020