(Yicai Global) May 19 -- A former deputy governor of the Bank of Finland deems that it is largely due to a lucky delay that Finland became the only country in the eurozone that avoided a decline in gross domestic product growth during the Covid-19-hit first quarter.

However, the Finnish economy should still shrink significantly this year, Seppo Honkapohja told Yicai Global in an exclusive interview. In the first quarter, the GDP of countries that have adopted the euro as their currency fell by 3.8 percent from a quarter earlier, according to the latest data.

Below are some highlights of the interview.

Yicai Global: How did Finland achieve economic growth in the first quarter?

Honkapohja: The simple reason is that in Finland, the pandemic started a little bit later than in other countries. If looking at the business cycle of Finland, it is often a little bit behind Western Europe and the United States. The cycle is not fully a coincidence. The starting situation was still a situation where the order books of Finnish companies were basically full in many, many cases. So Finland started in a reasonably good situation.

Right now. I think we are clearly going into a recession. My personal guess is that in the middle of that, the GDP drops by about 7 percent or 8 percent.

YG: What caused the relatively resilient performance in Northern Europe when compared to Southern Europe?

Honkapohja: I think this has been a fairly long-term situation. The Nordic countries have a reasonably strong economy. They are very wealthy so the growth rates are not that impressive, but they are fairly solidly in the growth. That's one reason for that expectation. If you look at some Southern European countries, they have been either chronically in difficulties like Italy or they have been very cyclical, like Spain. They are now being much more hit by this pandemic.

YG: Will the pandemic intensify internal disagreements within the European Union, or even result in another crisis?

Honkapohja: I think it's too early to predict any crisis. But clearly that is the case. But this is typical. When we had the financial crisis a little over 10 years ago, it was the same story, that the Southern European countries were in difficulties and needed help from the northern countries.

And now this coronavirus, there will be help via the EU Commission's budget, but it will have to have fairly tight conditions of course. Northern Europe is providing the funds for this fund. I think it's largely providing funds for the EU Commission. And then the recipients are largely the Southern European countries. And you can’t give aid without [determining] the conditions first, or you'll just be wasting your money.

YG: What vulnerabilities has the epidemic exposed in the Finnish economy?

Honkapohja: It's too early to tell. But obviously, we know many sectors are claiming that they are in difficulties but it’s also partly lobbying. So it is hard to say how real it is. But surely the situation is difficult. The first-quarter results come out at the end of March and some big companies are reporting pretty good results. But that's the first quarter.

For the second quarter, we are gonna see the results in August and I'm sure those are going to be quite a bit worse. As I said, we are in the early stages and it is very hard to say how far this goes. Finland is an open economy. Exports are a big part of our economy. And our faith depends on what happens to the rest of the European countries and even further.

Editor: Chen Juan, Emmi Laine