The latest economic forecast from the Ministry of Finance of Finland has reported that the country’s economic growth is expected to accelerate towards the end of this year, with the recovery likely to boost economic growth in 2022.
The ministry report says Finland’s gross domestic product (GDP) is expected to grow 2.6% in 2021 as the coronavirus outbreak subsides, then 2.5% next year and 1 , 5% in 2023.
“The Finnish economy has contracted less than expected”, financial adviser Jukka Railavo said, adding that it was a “positive surprise” that the industry, commerce and construction sectors held their own in 2020 despite the outbreak.
The ministry’s forecast is based on the assumption that the coronavirus outbreak will be over by the fall. If this turns out to be the case, the savings accumulated by households should be spent, businesses will be more willing to invest and public stimulus measures will support growth, according to the ministry.
“Controlling the epidemic situation as well as further supportive measures will also play a role,” Railavo said.
The economy is not expected to fully recover from the coronavirus outbreak until the end of 2021, as the ministry believes that the significant increase in new infections in the spring will likely continue to cause economic uncertainty in the near term.
However, as more people are vaccinated and the seasonal impact of the virus eases over the summer, restrictions will be lifted and the economy will begin to recover, the ministry said.
Inflation will return to normal, however, Railavo added, as economic growth in 2022 along with falling unemployment will lead to higher inflation.
“The economy will resume its normal course in 2022”, indicated the head of department of the ministry Mikko Spolander mentioned. “Unfortunately, the state of public finances after the epidemic will lead to a gradual decline due to an aging population, sluggish growth prospects and a chronic deficit in public finances.”
According to the Ministry of Foreign Affairs, the general government deficit will decline sharply in 2022, with the lifting of restrictions and the recovery of the economy.
Depending on how quickly the global economy is recovering from the Covid crisis, the Finnish economy could improve even faster than expected, according to the financial adviser. Marja Paavonen.
“The blow was not as bad as it was initially estimated during the fall,” said Paavonen.
The forecast also depends on the coronavirus situation in Finland in the fall, as another spike in infections could lead to a reintroduction of restrictions that restrict business activities and daily life.