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MEAE situation report: cautious economic recovery, regions planning aftercare and reconstruction

Ministry of Economic Affairs and Employment
Publication date 17.6.2020 11.20 | Published in English on 22.6.2020 at 10.22
Type:Press release

The fourth information package of the Ministry of Economic Affairs and Employment (MEAE) collates monitoring data on businesses, the labour market, the service capacity of the Ministry's administrative sector, and changes in operating conditions during the coronavirus crisis. Situation assessments of this kind focus on industry and regional development prospects.

Hard times still lie ahead for industry

Orders and output continued their slight decline in all sectors of industry, with orders falling by 13 per cent and output by 2.2 per cent in April compared to April 2019. No sharp fall was seen in the spring. The drop in Finnish industrial output was very moderate by international standards, with output continuing in Finland as other countries were closing industrial plants. Despite demand from industry, uncertainty in international demand will nevertheless also be reflected in autumn output and orders. Finnish industry was already in a compromised condition even before the coronavirus pandemic, and difficult times are expected in the autumn.

Exports and imports collapsed in April, with a 19.9 per cent fall in the value of exports year-on-year and imports 27.2 per cent lower than last year. The global behaviour of the pandemic is important to export industry. The course of the virus and a potential second pandemic wave in the autumn could cause social shutdown measures, with an accompanying risk of falling demand in Finland’s export-oriented industry and realisation of production chain risks. This would have major social implications from the perspective of high employment opportunities in industry and societal value added.

Turnover in services fell by almost 17 per cent in April year on year. The largest impact in the main service industries was a 68 per cent drop in turnover of the hotel and catering sector. The next most severe impact was a fall of about 41 per cent in turnover from the arts, entertainment and recreation sector. The trading sector fell by about 6 per cent, with major disparities between the impacts felt in various areas of trade. Investments were 1.8 per cent lower than in the first quarter of last year.

Consumption rose in May-June

The rate of bankruptcies has risen slightly compared to 2019, but no wave of bankruptcies has occurred so far. According to Statistics Finland, a total of 1,188 bankruptcy applications were filed in January – May 2020, which is 5.5 per cent more than in the corresponding period a year earlier. Total staffing in the businesses affected was 5,659, which is 8.2 per cent more than in 2019. The rate of bankruptcy applications rose in industry and mining, construction, hotel and catering, and other services, with the numerically largest absolute growth occurring under the last of these main headings where 370 bankruptcy applications were filed. This is 39 bankruptcies (11.8 percent) more than a year earlier. The number of bankruptcies decreased in agriculture, forestry and fishing, trade, and transport and storage. The numerically largest drop in bankruptcy applications year on year was seen in the trading sector.

Financing and other measures taken by the government and in house by businesses have helped businesses to survive and continue operating for the time being. The main recipients of Business Finland subsidies were in the trading sector, the software and gaming sector, and the tourism and catering sectors. Subsidies granted by Centres for Economic Development, Transport and the Environment (ELY centres) have mainly been allocated to catering, retail trading, ground transport (especially taxis) and the software and consulting sector. Finnvera funding was mainly allocated to industry, trade and consumer services, and business services. Funding from Finnish Industry Investment Ltd. (Tesi) was mainly disbursed to industry and to tourism and catering. More than a third of businesses responding to the coronavirus survey of the Confederation of Finnish Industries report that they have developed new products, services or business operations to cope with the crisis.

A lifting of restrictions and easing of the epidemic situation have brought a cautious recovery in domestic demand and confidence. Domestic businesses operating in services and in sectors that rely on consumer demand have enjoyed support measures, and consumption has begun rising again in May-June after bottoming out in April. Credit card information published by Nordea suggests that consumption has returned to pre-crisis levels. While the recovery in consumption may help to boost the economy, the uncertain situation in industry will have an extensive overall impact.

Regions acting briskly in the coronavirus crisis

The impacts of the coronavirus crisis on regional economies and employment have been substantial in all regions, with businesses forced to resort to large-scale layoffs. Growth in the number of new lay-offs nevertheless clearly fell in May, with the number of laid-off employees decreasing in all ELY regions since the first half of that month. Labour shortages have even continued in some regions and sectors, despite the crisis.

The suspension of air traffic is regarded as highly detrimental to the future recovery and growth of the business community. Air connections are considered essential to international business in the regions.

Regional reviews strongly highlight the deterioration of an already compromised economic situation in municipalities due to declining tax revenues. This, in turn, causes uncertainty concerning realisation of the public investment that is important for recovery.

All regions have been highly active, launching immediate measures in the early stages of the crisis to mitigate its impacts. Advisory and funding measures were rapidly mobilised, with good collaboration between various operators. Budget allocations for sustainable growth and vitality in the regions have been wholly channelled in several regions into swiftly mitigating and recovering from the impacts of the coronavirus crisis.

Regional coping plans to be completed this year

Over the spring the regions have begun planning longer-term aftercare and reconstruction measures. Regional coping plans have been or will be prepared under the direction of provincial federations in all regions by no later than the end of 2020. These plans will outline key post-crisis objectives and measures. The importance of a common general understanding and information sharing as a basis for preparation and decision-making is crucial.

The recovery plans focus on maintaining and developing the business environment, and on investment, employment and skills. The wellbeing, social integrity and sustainable development of children and young people are also prioritised. The recovery and reconstruction phase is broadly viewed as an opportunity for new initiatives and growth trends, and especially for boosting digitisation and climate measures.

The crisis has shown that there is strong motivation to reform in the regions. Resources and a diverse range of tools will be required to address negative impacts and generate new growth and employment. Renewal and growth based on advanced skills and innovation will call for investment in R&D and expertise.

Regional Development Prospects is a biannual publication that brings together the views of ELY centres and other parties involved in regional development concerning the current state and economic development of their sub-regions. This publication also collated information on regional plans and measures to recover from the coronavirus crisis. No situation report of the Ministry of Economic Affairs and Employment will be published in July. A decision will be taken on continuing publications in August.

Inquiries:
Ville Autero, Chief Specialist, Ministry of Economic Affairs and Employment, tel. +358 29 504 7137
Tiina Tikka, Director of Development, Ministry of Economic Affairs and Employment, tel. +358 29 504 7962
Hanna-Maria Urjankangas, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 29 506 3739

Previous situation reports (in Finnish)
Regional development prospects, spring 2020 (in Finnish)Link to an external website
MEAE's situation report (in Finnish)File opens in a new tab pdf 1.9MB
areas and regions business subsidies coronaviruses development economy enterprises epidemics epidemics forms of support lines of business organisations pandemics situational awareness
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