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Income, consumption and savings in Finland

Income, consumption and savings in Finland

Finnish households have accrued savings during the coronavirus pandemic, as their consumption opportunities have been limited. Who has been saving, and which sectors will benefit once the economy opens up?

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Nordea Economic Outlook May 2021 front cover

Household disposable net income in Finland increased last year despite the pandemic, as earned income remained at the previous year’s level despite the weak trend in employment. One contributing factor was public sector wages, which increased when the cuts made to holiday pay expired. The increase in unemployment benefits in turn added to income transfers, which grew by 5%. Employment decreased last year especially among people below 30, as many of them work in the service sectors, which have suffered the most from the pandemic. As the trends were different in the different sectors, the changes in disposable income varied a lot.

Private consumption contracted by 4.9% in real terms last year, as consumption opportunities were limited. The sharpest declines in sales were seen in services and semi-durable goods, such as clothes. The weak trend has continued this spring in the restaurant and culture sectors. In contrast, consumer staples and durables, such as vehicles, have not been affected by the pandemic. In fact, there are already problems in the availability of bicycles, and the demand for electric and hybrid cars has boosted car sales.

Find out more about the Finnish economic outlook in the Nordea Economic Outlook: Unrestricted Growth.

Last year, households saved 5.7% of their disposable income.

Juho Kostiainen, Nordea Economist


Due to lower consumption and increased total income, households saved on average 5.7% of their disposable income last year, accumulating about EUR 7bn in savings in total. On top of this, households took out EUR 6.2bn more debt last year, primarily in the form of mortgage loans, as people invested more in their homes.  Higher savings and debt are reflected in bank deposits, which have ballooned by EUR 8.9bn. People have also used their money to invest in funds and equities, generating a net inflow of EUR 3.2bn last year. The data for fixed assets is not yet available from last year.

If private consumption jumps to the level corresponding to income over the next 12 months, it would grow by 6% even without any spending of accumulated savings. Some of the money will, however, be consumed abroad when people start to travel again. In 2019, Finns spent EUR 5.1bn abroad, which is EUR 1.7bn more than what foreigners spent in Finland. Last year, the trips made by Finns abroad dropped to one tenth compared to previous years. This suggests that as tourism starts to recover, more money will flow outside Finland again.

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Usually, the savings ratio has not turned negative after a recession, as people have continued to be careful and save for several years. The coronavirus pandemic has enabled especially the well-to-do households and older age groups to accrue savings. As their marginal propensity to consume is low even in normal circumstances, it will take them longer to start spending the savings they have on their bank accounts. Correspondingly, young service sector employees with low incomes who normally consume a larger share of their income have not been able to save as much during the pandemic.

We assume in our forecast that the household savings ratio will decrease significantly this year. Despite this, private consumption growth will be strong this year and the next, but there is an upside risk if people start to use their savings faster than in previous recessions.

Once the pandemic ends, consumption will initially be directed at sectors that have suffered the most from the coronavirus as a result of business restrictions. The demand for restaurants and culture will recover quickly. Hotels and public transport will also recover, but the remote work practices changed by the pandemic may decrease commuting and business travel permanently to some extent. On the other hand, the demand for home renovation services and new electronic appliances will most likely be subdued for a while, as consumption will lean towards services.

This article originally appeared in the Nordea Economic Outlook: Unrestricted Growth, published on 11 May 2021.


Juho Kostiainen, Senior Analyst, Finland
Juho Kostiainen, Nordea Senior Analyst

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