With the Russian invasion, energy prices will rise, transportation costs will rise and travel will be restricted. These things worsen the outlook for service companies.
Ukraine The outlook for service companies is also affected by the war, economic sanctions and general uncertainty, according to a recent economic review by Palta, the employers’ association for service industries.
Energy is becoming more expensive, transportation costs are rising and there are new restrictions on travel, for example with the closure of Russian airspace, Palta says.
The situation is reflected in the service sectors, especially transport, logistics and tourism services.
“The recovery of service exports, which have been severely affected by the Korona, to pre-pandemic levels will be delayed until next year. The longer the situation lasts, the more the general confidence in the economy weakens, which may also affect the consumption of services, ”Palta Chief Economist Martti Pykäri says the organization in a press release.
However, according to Pykär, the sanctions are widely accepted in the service sectors, although they are detrimental to the operations of several companies.
Transportation and with the exception of tourism, exports of services have already recovered to pre-pandemic levels.
For example, exports of ICT services grew by 13 per cent last year and exports of consulting services by 16 per cent. Growth is still continuing, and according to Palta’s forecast, total exports of services will grow by almost 15 per cent this year, to a total of more than EUR 30 billion.
However, growth is not quite enough to offset the decline in service exports caused by the corona pandemic before next year. Last year, the value of service exports was about ten times below the pre-corona level.
How sanctions and the withdrawal of companies en masse from Russia will then affect service exports?
According to Palta, trade with Russia accounts for only a small part of Finland’s service exports and imports. The country’s importance in foreign trade in services has waned over the last ten years.
Last year, service export revenues from Russia totaled 496 million, which accounted for only two percent of total service exports.
In addition, export revenue from tourism in Asia generated about 240 million. After tourism, the second largest export item to Russia is various ICT services, which export about EUR 220 million a year.
Back in 2013, Finland’s service export revenue from Russia was almost two billion euros, which corresponded to ten per cent of total service exports.
Air transport and tourism accounted for more than 70% of this.
Russia accounted for two percent of Finland’s service imports in 2021.
The world situation Despite the uncertainty, Palta forecasts that net sales will grow by a total of 8% this year in the service sectors represented by Palta, ie transport and logistics, business and expert services, administrative and support services, information and communication, technical services, entertainment and recreation and other services.
Employment is expected to grow by a total of 24,000 people.
According to Paltan Pykär, the war in Ukraine and the closure of the Russian economy may also affect the development of the number of people employed in the coming year, as the situation may be reflected in the movement of international labor.
Currently, there are about 34,000 Russians working in Finland and about 3,000 Ukrainians.
“The growth of mobility and leisure services is supported by the increasing consumption of households and its emphasis on services. During the pandemic, households have accumulated savings, which are now being consumed more than before, ”Pykäri says in a press release.
“Correspondingly, the fastest growth in expert services and administrative and support services is already beginning to unfold as the general economic climate cools down.”
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