According to the Bank of Finland’s interim forecast released on Friday, the country’s economy is anticipated to stay in a recession until the end of 2024, with signs of recovery only appearing towards the later part of the year.
The central bank is predicting a 0.5 percent contraction in Finland’s economic growth for this year, with a projected turnaround towards the end of the year. Looking ahead, the bank projects that the country’s gross domestic product (GDP) will increase by 1.7 percent in 2025 and 1.5 percent in 2026.
In its December 2023 forecast, the bank had estimated a GDP decrease of 0.2 percent for 2024, with growth of 1.5 percent and 1.3 percent expected for the following two years.
The bank attributes the sluggish economy to high levels of prices and interest rates, as well as weak residential construction and declining exports. However, it notes that employment remains strong and inflation has slowed down.
Meri Obstbaum, the head of forecasting at the Bank of Finland, stated in a press release that although the economy’s performance has been weaker than forecasted, the outlook for the future remains the same. The recession is believed to have already hit its lowest point, with growth expected to resume as household purchasing power strengthens.
The bank’s forecast indicates that inflation is projected to drop below 1.0 percent this year, but a slight increase is anticipated in 2025.
There is a warning about the potential impact of geopolitical tensions on further weakening economic growth. Additionally, the bank mentions that inflation in the euro area could persist longer than expected, and any delay in reducing interest rates would prolong the recession.
