Jukka RailavoA senior ministerial assistant in the Ministry of Finance said the decision to lower the base growth forecast from 3.0 per cent to 1.5 per cent is due to exports and consumer prices. According to him, trade between Finland and Russia will practically end due to sanctions on export products and sanctions that weaken Russia’s trade capacity.
“The same channels also affect the growth of EU countries. It adds a bit of a negative impact to export demand here, ”he said.
Inflation, on the other hand, is projected to accelerate to 4% in this year’s baseline scenario and as high as 7% in the second scenario.
“According to preliminary data, inflation accelerated to 5.6 percent in March,” Railavo said. “Prices and expected price developments will reduce or slow down the growth of household purchasing power. That is the second most important reason for the revision of the forecast. “
The Finnish economy is forecast to grow by 1.7 per cent in 2023 and 1.5 per cent in 2024.
The war will affect public finances not only by slowing economic activity, but also by requiring relief and preparedness measures, he said. Jenni Pääkkönensenior adviser to the Ministry of Finance.
“The general government deficit narrowed significantly last year, and we expect the deficit to decline further in the short term, this year and next. After that, the deficit will start to grow. Public finances are expected to run a deficit of around € 5.5 billion in 2025, he said.
The Ministry of Finance stressed that the forecast is subject to greater uncertainty than usual, given the possibility of further tightening of sanctions.
The forecast is based on three basic assumptions: war will not expand, sanctions and counter-sanctions will remain in place at their current level for a long time, and that the coronavirus pandemic will not require major restrictions. production, demand and employment.
In December, the ministry forecast the economy to grow 3.0 percent and consumer prices to rise 2.6 percent in 2022.
Mikko SpolanderThe head of the finance department of the Ministry of Finance said that Russia’s attack on Ukraine has blurred the clearly optimistic outlook for the economy, reducing the rise to slow growth and accelerating inflation.
“The effects are great, but frankly, they’re not insurmountable,” he summed up.
He later clarified the summary, referring to the possibility of ending all energy imports from Russia to the EU.
– For example, there have been quite dramatic figures for the growth impact in Germany, he admitted. “But I think if Finland’s growth slows to about 0.5 percent as a result in two years, the costs don’t seem insurmountable, given the significant impact of the end of energy imports on the development of the war.”
“This blow is significantly smaller than the blow caused by a coronavirus pandemic in 2020, for example.”
Aleksi Teivainen – HT
Source: The Nordic Page