The Finnish economy is recovering rapidly from the Covid crisis, the Ministry of Finance has announced, but the pace of recovery will start to slow down next year and in 2023.
The ministry forecasts that the Finnish economy will grow by 3.3 per cent this year, 2.9 per cent next year and 1.4 per cent in 2023, according to figures published at Monday’s press conference.
The ministry added that the rapid recovery was driven by three main factors: the steady introduction of vaccinations, the removal of coronavirus restrictions in line with the increase in vaccine coverage, and the strong confidence of households and businesses in the future.
While the outlook looks promising, the departmentโs chief of staff Mikko Spolander, said at a Monday morning news conference that concerns remain.
"Finland’s aging rate cannot be maintained at the current level in the longer term," he said.
Spolander also highlighted the issue of employment, noting that while the peopleโs employment rate has improved with recent economic growth, there is still much room for improvement.
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"Long-term unemployment remains high, job vacancies abound and skills shortages have once again been highlighted as a constraint on economic growth," Spolander added.
In addition to improving the employment rate, Finland should also focus on increasing investment to deal with the expected structural changes in the world economy, Spolander said.
Attracting investment requires a functioning labor and housing market, a strong education and research infrastructure, a smooth immigration process and a competitive tax rate.
"We donโt have to be the best in the world at everything, but we need to be equally good at everything [of these factors] in relation to competitors," Spolander said.
The ministry does not expect a possible continuation of the epidemic to affect economic recovery, but uncertainty about viral variations and vaccine coverage will affect the overall economic forecast.
Debt to GDP is growing
The global economy has also recovered rapidly from the Covid crisis, the ministry continued, largely due to slower liberalization of consumer demand.
This, in turn, has helped boost Finnish exports, but growth is hampered by a lack of industrial components in some sectors and logistical problems.
Inflation also accelerated in the first half of the year, mainly due to rising energy prices, but price increases have become more common in recent months.
The ministry said that the expected economic growth and GDP growth will not completely correct Finland’s budget deficit, ie the revenue and expenditure imbalance, but it will contribute to the narrowing of the deficit.
Finland’s debt-to-GDP ratio increased by 10 percentage points to almost 70% last year, an all-time record, and is expected to rise to around 73% by the middle of this decade.
Increased spending on health care and care for the elderly – especially as the Finnish population ages – could lead to a further widening of the budget deficit over the next decade.
Source: The Nordic Page