The continuing war in Ukraine, rapid inflation, the European energy crisis have darkened the economic outlook for the global economy, the euro area, and, in particular, for Finland. Economic growth is slowing down and inflation accelerating more than it has been previously anticipated. Measures to slow down inflation and possible energy shortages may weaken economic growth even more than predicted in Europe and elsewhere in the international economy. In 2022, Finland’s gross domestic product (GDP) is estimated to increase by 1,7%, although growth will slow considerably towards the end of the year, and, in 2023, it will slow to 0.5%.
The Ministry of Finance’s forecast does not predict a crisis or a collapse. Nevertheless, economic growth threatens to slow down significantly as we approach next year, and the imbalance in public finances threatens to deepen.The difficult situation on the European energy market continues, and energy consumption may have to be regulated this coming winter.
Despite the increase in employment, the real households' income is decreasing at the moment. The rise in consumer prices will weaken household purchasing power. It is expected that the domestic demand will begin to recover towards the end of the 2023 year as the rise in prices will slow substantially and real wages will rise slightly. However, the high price level and weakened employment situation will continue to slow the growth of household purchasing power in 2023.
The rapid growth in employment and consumption has increased tax revenues and strengthened the public finances in 2021 and 2022. As economic growth slows, general government deficits and the debt ratio will start to grow again. The constantly growing debt servicing costs reduce the already tight buffers of general government finances.
The full information and the source text can be found at Finnish Ministry of Finance website.
Published 23.10.2022, FINREPO