BoF: Finland’s economy is sinking into recession | News
Although according to the economic forecast of the Bank of Finland, the Finnish economy will grow by 1.9 percent for the whole year 2022, it warned of a slight recession, in which the GDP will shrink by 0.5 percent.
The Bank of Finland has warned of a future recession for the year 2023 in its bulletin published on Friday.
The organization stated that although according to its forecast, Finland’s gross domestic product will grow by 1.9 percent for the entire year 2022, GDP is expected to contract by 0.5 percent in 2023.
The bank cited the higher cost of living, inflation and the energy crisis exacerbated by the war in Ukraine as the catalysts for the looming recession.
“High inflation and the weakening of purchasing power will cause a decrease in private consumption in the next few years. The decrease in purchasing power and the rise in interest rates needed to curb inflation will especially affect indebted households, who may have to reduce their consumption significantly.” “, says BoF’s Forecasting Manager Meri Obstbaum.
The bank said in its multi-year forecast that GDP will grow by 1.1 percent in 2024 and 1.5 percent in 2025.
Although the GDP forecasts did not look promising, the forecast stated that inflation will slow down to five percent in 2023. In the following years, 2024 and 2025, inflation will settle at two percent.
“As inflation slows down, the purchasing power of households improves and uncertainty about the economy subsides. This encourages consumption and strengthens the conditions for economic growth,” Obstbaum stated.
In addition, the bank said that favorable conditions in the labor market are waning and that with the decline in GDP, the employment rate is forecast to fall temporarily in 2023. However, the organization stated that it should recover soon after.
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