The Bank of Finland’s mid-term forecast: the economy is at rest

The Bank of Finland’s mid-term forecast: the economy is at rest

Despite the difficulties, the Finnish economy has endured so far, but not all the effects of rapid inflation and rising interest rates have been seen. In addition, the risks of the international economy have increased recently,” says Meri ObstbaumHead of forecasting at the Bank of Finland.

In 2022, Finland’s economy grew by 2.1% thanks to a strong start to the year, but the war and energy crisis reversed the trend. According to the forecast, the economy will contract by 0.2% in 2023. Since interest rates are expected to remain higher than before, and there is no rapid recovery in Finland’s export demand, economic growth will remain subdued in the coming years. According to the forecast, the economy will grow by 0.9% in 2024 and 1.5% in 2025.

Inflation is expected to return to below 2 percent in 2024

Consumer prices rose unusually fast in 2022. At the end of the year, energy prices fell rapidly, and upward pressure on consumer prices is expected to ease this year. According to the forecast, inflation will be 4.6% in 2023. The rise in the prices of services and consumer goods will also gradually slow down, and in 2024 inflation will return to less than 2%.

Employment strengthened significantly in 2022. The recession stops the favorable development of the labor market. However, since the slowdown in economic growth is short-term, employment will remain good in the coming years as well.

The biggest risks in the forecast are related to the financial situation, the energy market and the prolongation of rapid inflation, which, if realized, may lead to weaker than expected economic development.

All in all, the forecast suggests that the Finnish economy will face significant challenges in the coming years, but the outlook is not completely gloomy. Although the economy is expected to remain subdued for the foreseeable future, the recession is likely to be short-lived. However, there are risks associated with the outlook, which both decision-makers and companies should monitor closely. By staying alert and reacting to changing conditions, Finland can continue to face the future economic challenges.

HT

Source: The Nordic Page

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