Finland’s economy will sink into recession in 2023, says the Ministry of Finance, the Bank of Finland

However, the economy is not returning to the growth path that was expected before the Russian invasion of .

“We expect to slow down clearly over the next year and consumption to recover in 2024,” Janne Huovarifinancial advisor at the Ministry of Finance, was quoted saying At ’s press conference in on December 20.

The rise in consumer prices is predicted to slow down from around seven percent this year to four percent next year, which is due to raw material prices settling down to a more reasonable level and supply chain bottlenecks caused by the pandemic easing. In 2024 and 2025, consumer prices are expected to rise by around two percent.

According to the Ministry of Finance, the public debt in relation to the will decrease by almost a percentage point to 71.7 percent this year. The decrease is due to the increase in tax revenues brought about by strong economic growth and a stable employment situation, the expert explained. Jenni Pääkkönen.

However, factors such as the imbalance of public revenues and expenditures due to the aging of the population will start to scratch the debt ratio starting next year and will increase it to around 75 percent in 2024.

Mikko SpolanderThe Director General of the Ministry of Finance stated that slipping into recession is not as big a concern as the economy collapsing downward for a long time.

“The demand for welfare services is increasing, but the number of employees is not. There is a lot of demand for skilled labor in health and welfare services and widely in other sectors of the economy as well. In addition, financial resources move from stagnant sectors to growth sectors more slowly than in other , and productivity improves more slowly than in these comparison countries,” he said at the Helsingin Sanomat press conference.

: Finland’s economy shrinks by 0.5%

Bank of Finland 16 December said it also expects the national economy to slip into recession due to the energy crisis and the rapid rise in the cost of living. Finland’s gross domestic product is estimated to shrink by 0.5 percent in 2023, but grow by 1.1 percent in 2024 and 1.5 percent in 2025.

“High inflation and declining purchasing power will weaken private consumption in the coming years. The weakening of purchasing power and increases caused by rapid inflation will especially affect indebted households, which may have to cut consumption significantly, said Meri Obstbaum, Head of Forecasting at the Bank of Finland.

The monetary authority estimates that consumer prices will rise by five percent next year before settling at around two percent for the years 2024–2025.

High inflation eats away not only at consumers’ purchasing power, but also at companies’ and consumers’ confidence in the economy. Financial uncertainty, muted economic prospects and sharply rising financing costs make companies very cautious in their investment decisions.

The Bank of Finland added that ’s attack on Ukraine could at worst cause the Finnish economy to shrink by 3.6 percent in 2023.

However, its more optimistic baseline forecast highlighted the gradual easing of raw material and component shortages and disruptions to global freight traffic.

“As inflation slows down, the purchasing power of households improves and financial uncertainty disappears. It boosts consumption and strengthens the conditions for economic growth, Obstbaum said.

Aleksi Teivainen – HT

Source: The Nordic Page

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