Economic situation and outlook
The Labour Institute for Economic Research LABORE forecasts economic growth of 1.8 percent for the current year, 1.5 percent for next year, and 1.4 percent for 2024. At the beginning of the year, the COVID-19 pandemic still slowed the economy, but overall its impact is now expected to be limited.
Economic growth was strong in the early part of the year, and the outlook was favourable both in Finland and in Europe. However, the strong growth at the start of the year weakened after Russia launched its war against Ukraine. As a result, the extensive sanctions imposed by Western countries and the general reluctance to engage in cooperation with Russia have had a negative impact on the economy, both directly through the collapse of trade with Russia and indirectly through weaker economic prospects across Europe.
According to our assessment, Finland’s trade with Russia can nevertheless be largely replaced by new import and export markets, which will mitigate the impact.
Finland’s economic growth is supported by private consumption and investment. Employment continues to develop positively, although at a somewhat slower pace than before, and earnings growth remains moderate over the forecast period. In our view, the economy remains in an upswing despite the new shock. Growth is moderate and the unemployment rate declines.
However, public finances remain clearly in deficit, partly due to new spending pressures arising from the war in Ukraine. The war further intensifies inflation, which had already accelerated after the COVID-19 pandemic, thereby increasing pressure to tighten monetary policy in the euro area. According to our forecast, euro area interest rates will rise during 2022–2024. (AI translation)
