Economic growth slows and inflation accelerates in Finland

growth According to the Treasury, the Finnish economy will slow and consumer prices will recover more than expected.

The Treasury released its latest economic forecast on Friday, stating that the national economy will grow 1.4% in 2022 and 1.1% in 2023. Meanwhile, inflation will land at an average of 5.8% this year. According to the National Consumer Price Index.

“To raise the economy to a more favorable and ecologically sustainable growth trajectory to strengthen our finances, we need the ability to successfully compete for investment among our peers.” comment Mikko SporanderDean of the Faculty of Economics, Ministry of Finance.

The economic outlook is clouded, especially by Russia’s war of aggression in Ukraine. Prolonged wars increase the risk of negative growth, or recession, in Finland for the second consecutive quarter.

The sharp rise in consumer prices due to the war could hinder household consumption and further worsen the economic outlook.

Inflation is also putting pressure on rising wages.

“It is difficult to estimate the outcome of the municipal sector’s wage program for future wage settlements in other sectors, and there are risks in both directions. The price-wage spiral in the economy is self-sustaining and long-term that puts a brake on economic growth. It’s a phenomenon, “said the press release.

The Treasury also expressed concern about rising interest rates and their impact on both household and fiscal debt repayment costs. Yields on government 10-year benchmark bonds surged by nearly 2 percentage points in six months, rising to one of € 300 million in 2023 and € 900 million in 2026.

“The rise in debt repayment costs results from the remaining public spending, reducing the already tight buffer for general government finances,” it reminded.

Meanwhile, according to the ministry, the Finnish economy could be boosted if the government decides to accelerate its pursuit of independence from fossil fuels and spurs green investment in the energy sector. ..

Aleksi Teivainen – HT Economic growth slows and inflation accelerates in Finland

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