55
Finland GDP is projected to stall in 2023 and grow by a moderate 0.9% in 2024, before picking up to 1.8% in 2025. As energy prices ease, private consumption is set to recover moderately in 2024 despite the drag from higher interest rates, which together with declining house prices will weigh on residential investment. Unemployment is expected to slowly increase until mid-2024 before starting to decline, as the economy grows and employment growth gains momentum. Lower energy prices and weak demand should help bring headline inflation down from 7.2% in 2022 to 4.5% in 2023 and 2.2% in 2024. The planned increase in defence and security spending, as well as moderate tax cuts, will outweigh cuts to spending on other items in 2024 and 2025; as a result, fiscal policy is projected to remain expansionary. Given rising public debt, earlier fiscal consolidation would be more appropriate. Improving female and senior labour force participation is necessary to boost labour supply in an ageing society, in addition to the planned reforms of unemployment insurance. Further investing in decarbonisation is also paramount. Consumer and business confidence remains depressed The Finnish economy expanded sluggishly in the first half of 2023 as the drop in investment was milder than expected, but contracted by 0.9% in the third quarter according to flash estimates. High inflation and rising mortgage rates are still a drag, albeit a fading one, on households’ purchasing power. After falling by over 7% in the previous two years, real wages rose by 1.4% in the third quarter of 2023. However, consumer confidence declined in August and industrial confidence has kept declining since early 2022. Against the backdrop of weak demand, the unemployment rate edged up to 7.3% in September, while headline and core inflation continued to decline. The drop in measured headline inflation is magnified by the downward correction of the electricity price index by Statistics Finland in August 2023, which will affect year-on-year headline inflation until July 2024.
Finland
Source: European Central Bank; Statistics Finland; and Bank of Finland. StatLink 2 https://stat.link/j2vclu
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023