The continuation of the Ukrainian crisis increases the possibility of a recession: Finnish Ministry of Finance

HELSINKI, June 17 (Xinhua) — The conflict between Russia and Ukraine is clouding Finland’s economic prospects, the country’s finance ministry said. The possibility of Finland entering a recession, where the country’s gross domestic product (GDP) falls for two consecutive quarters, will increase, the ministry added.

Accelerating inflation is slowing economic growth, according to an economic study released Friday by the ministry. Finland’s GDP will grow by 1.4% this year, according to the survey, while in 2023 it will grow by 1.1% and in 2024 by 1.3%.

In 2021, growth in Finland was 3.5%.

“The economy will recover from COVID-19 and also, over time, from the war, but the economic outlook remains bleak. ability to successfully compete for investment among our peers,” said the ministry’s director general, Mikko Spolander.

Inflation in Finland in 2022 will be 5.8%, which will dampen the real purchasing power of households.

The main cause of rising inflation is rising energy prices, but also a spike in food prices. Rising energy and raw material costs have also had an impact on the prices of goods and services.

Finland’s high level of employment has maintained household incomes and purchasing power, the ministry said. However, in 2023, private consumption will slow, as employment growth is expected to slow.

A major imbalance in Finland’s public economy caused by the COVID-19 outbreak, and the resulting restrictive measures, began to unwind last year. The ministry estimates that the Finnish economy has rebounded this year, with tax revenues growing rapidly. However, the cost of Finland’s external debt has increased with rising interest rates.

The outlook for Finnish exports is worse than expected in the spring, due to lower exports to Russia. Finnish exports were also affected by lower consumption levels in target export countries.

Rising inflation can also lead to higher than expected salary increases. A price-wage-rise circle would hamper economic growth.

However, the ministry said Finland’s economy could be boosted if independence from fossil fuels continues more rapidly and green investment projects in the energy sector increase.

Christi C. Elwood