Economists OP Financial Group expects the Finnish economy to grow by 2.0 per cent in 2022 and by 0.6 per cent in 2023.
Although economic growth will be supported by the recovery of exports and consumption of services from the coronavirus pandemic, it will slow down as a result of rising inflation, a tightening of monetary policy and the slowdown in export markets, and war. Russia’s attack on Ukraine.
The financial group forecasts that consumer prices will rise by 5.4 per cent in 2022 and 2.8 per cent in 2023. The war has so far had a much-anticipated effect on the Finnish economy: Finnish exports to Russia have fallen sharply and prices for some raw materials and capital goods have risen.
Reijo HeiskanenOP Financial Group’s chief economist said the war was not expected to deal as badly on the economy as the coronavirus pandemic.
“The effects of the war are mixed with other factors affecting growth. Economic growth will gradually slow as a result of these factors, he commented in a statement on Monday.
Finnish exports are expected to grow reasonably well this year, despite the complete cessation of Russian exports. However, the positive development will slow next year as growth in export markets and the recovery in consumption of services have slowed.
“Private consumption will exceed pre-coronavirus pandemic levels in the first half of this year as consumption of services recovers. Growth in private consumption will be slowed by declining real disposable income. In 2023, consumption growth will slow down, as it depends on rising incomes, Heiskanen said.
According to OP Financial Group’s economists, the euro area’s GDP will grow by 3.0 per cent in 2022 and 1.7 per cent in 2023. Inflation will accelerate to 6.6 per cent this year, but will slow to 3.0 per cent next year.
The European Central Bank (ECB) is expected to raise interest rates this summer for the first time in more than a decade to try to curb rising consumer prices. As the policy direction is expected to continue beyond this year, Euribor rates are projected to move close to 1.5% in the first half of 2023.
OP Financial Group pointed out that the economic outlook is subject to considerable uncertainty due to rapid and unusual fluctuations.
However, the risks are balanced: stagnant demand and overcoming bottlenecks could lead to surprisingly strong growth. Growth may be relatively slowed by, among other things, declining purchasing power, capacity constraints and China’s economic problems.
“Only a few indicators currently support the view that the economy would slip into recession next year. However, the risk is not non-existent, as a sudden and widespread interruption of Russian gas supplies to Europe could cause a recession not only in Germany but also in Finland, Heiskanen comments.
Aleksi Teivainen – HT