“Building an economy on a more favorable and ecologically sustainable growth path that strengthens public finances requires the ability to compete successfully for investment among peers,” comments Mikko SpolanderDirector of the Finance Department of the Ministry of Finance.
The economic outlook is overshadowed in particular by Russia’s war of aggression in Ukraine. The prolongation of the war increases the risk of negative growth, ie a recession, in Finland for two consecutive quarters.
The sharp rise in consumer prices, partly caused by the war, could slow down household consumption and further weaken the economic outlook.
Inflation is also putting pressure on wage increases.
“The impact of the municipal wage program on future wage solutions in other industries is difficult to assess, and there are risks in both directions. The price-wage spiral in the economy is a self-sustaining and longer-term phenomenon that is holding back economic growth, ”the release says.
The Ministry of Finance also expressed concern about rising interest rates and its impact on household and government debt service costs. It stressed that the yield on the 10-year government reference bond has risen by almost two percentage points in six months, bringing the estimated interest expenditure by € 300 million in 2023 and € 900 million in 2026.
“Rising debt service costs come from public spending and reduce already tight fiscal buffers,” it recalled.
On the other hand, the Finnish economy can gain momentum if the government decides to strive for independence from fossil fuels in an accelerated timeframe and, according to the ministry, succeeds in increasing green investment in the energy sector.
Aleksi Teivainen – HT
Source: The Nordic Page