Investments are predicted to shrink in various industries, by 6.2 percent this year, especially due to the recession in the construction industry.
“Especially housing construction is running into difficulties. There is a threat of a wave of bankruptcies and a permanent loss of skilled foreign workers who become unemployed,” the forecast reads.
PTT estimates that although there is no need for broad-based fiscal stimulus measures, the government should implement precisely targeted support measures to resolve the situation. The government should also reconsider its plan to cut Social Security benefits due to the impending recession because of its potential employment impact.
“It would be a serious political mistake to cut social security in a prolonged recession; it would increase exclusion from working life and slow down employment growth in the long term.”
The Economic Research Institute stated that it estimates that the number of unemployed people will grow by around 50,000 people in 2024. Especially at risk of unemployment are part-time employees who are terminated during the recession.
“Recently, the labor market has shown signs for the worse, and employment will weaken in the future.”
PTT predicts that the employment rate will decrease from 73.8 percent to 72.4 percent and the unemployment rate will rise from 7.3 percent to 8.5 percent in 2023–2024. It highlighted that companies are reluctant to let go of workers because a global skills shortage could make it difficult to replace them once economic difficulties ease.
– Layoffs will be widely used next year, because they offer flexibility to companies in difficult economic conditions.
According to the institute, consumer prices will rise by an average of 5.7 percent in 2023 and 2.8 percent in 2024. In Finland, housing costs have become the main factor of inflation, when borrowers’ debt service costs have risen due to the European Central Bank’s reference interest rate hikes.
However, consumer prices for food will also continue to rise.
“Recent wage agreements have been aimed at compensating wage earners for the rise in prices. However, the wage increases partially support the price increase through increased labor costs and consumer demand, PTT estimates.
It predicts that private consumption will decline towards the end of the year due to continued inflation, high interest rates and economic uncertainty. Although the combination of slowing inflation and wage increases should stabilize real household incomes next year, it will not cause an immediate dent in private consumption.
“Individual households still have a lot to do before their purchasing power is restored.”
Aleksi Teivainen – HT
Source: The Nordic Page