Banks downgrade Finland's economic forecasts

OP Financial Group, the largest financial services group in Finland, lowered its forecast for the country's economic growth in 2015 from positive to negative, according to its financial forecast published Monday.

Russia's economic recession and weak growth in world trade stagnated Finland's economic growth in the first half of this year, said the forecast.

The economists of OP Group downgraded Finland's economic growth in 2015 from 1.0 percent, which was made in January this year, to minus 0.3 percent.

The financial group projected Finland's GDP to grow by 0.6 percent in 2016. The previous forecast made in March was 1.7 percent.

The mild growth will be driven by a pick-up in investments, continued small growth in consumption and dissipation of the biggest drag force relating to exports to Russia.

"The export-driven recovery that was expected for many years never materialized. Next year, the biggest boost to the economy will come from investment growth," said Reijo Heiskanen, OP Group's chief economist.

Heiskanen added that this will increase export potential later on as well.

The failure of the social contract negotiation in the labor market and the uncertainty in the economic policy may weaken consumer confidence and reduce domestic demand. This is also one of the reasons that will set back the economic growth of Finland, OP Group pointed out.

Aktia Bank, another Finnish financial institute, also lowered predictions for the Finnish economy on Monday, from 0.3 percent, which was made in March 2015, to minus 0.5 percent for this year, and from 1.4 percent to 0.5 percent for next year, mainly due to problems in the labor market. Endit