Brexit's Collateral Damage: Finns Buckle up for a Hard Landing

Brits' desire to leave the European Union has left many member states tallying losses. Among other countries who have suddenly found themselves on the losing end of the divorce is Finland. The country's economy is forecasted to shrink towards the end of the year in light of Brexit.

To make things worse, the Finnish mortgage society Hypo has recently emerged with a gloomy forecast, according to which Brexit is bound to bring down Finland's exports, investment and consumption, the Finnish newspaper Hufvudstadsbladet reported.

At present, Finland's economy is struggling with a depression that hit the country amid the EU-imposed anti-Russian sanctions. Incidentally, Finland is one the hardest hit nations by the sanctions war, with the damage being severely aggravated by a marked drop in trade and tourism from Russia, which both have fallen by about a third. Despite that, Finland remains hopeful that a slight improvement in exports to Russia will be reached in 2017.

With the relation with its major partner reaching its coldest point in years, the risk of severing ties with another one is not good news for Helsinki. According to Hypo, Brexit may lead to an economic downturn in the UK and the whole Eurozone. The length and depth of the recession will depend on the political stability and the monetary policy reactions, the think tank pointed out.

Today, the Finnish government has found itself between Scylla and Charybdis, Hypo pointed out. On the one hand, weak economic growth attracts more stimulation, but on the other hand, Finland has already exceeded EU limits when it comes to debt and sustainability, according to Hypo.

In addition to identifying the problems, Hypo came up with measures to strengthen the Finnish economy after Brexit. The first solution is to become open to dense urban construction to create a foundation for new ideas and jobs in the service sector. The second is to spur the older population to become more active in the labor market, while the third one is to increase competition through deregulation.

The prospects of Finland's economic growth rest therefore solely on the domestic market, Hypo's survey pointed out. The key to sustained growth is private consumption and the construction sector, which has been pointed out as "the locomotive for the entire Finnish economy."

On the whole, Finland's economic growth is estimated to remain positive towards the end of the year, despite the hardships. Hypo's chief economist Juhana Brotherus said that this is due to the unexpectedly strong growth at the beginning of the year.

Hypo is a private domestic credit institution specializing in mortgage loans.