The Finnish economy is still in recession. The recession has reached its lowest point, and a gradual recovery is expected to begin towards the end of 2024.
The instability seen in crypto-asset markets has had very little effect on the global financial system, but the growing and partially hidden linkages between markets are a cause for concern.
This Saturday 24 February 2024 marks the second anniversary of Russia’s unprovoked invasion of Ukraine. Along with the human suffering and displacement, war has scarred Ukraine’s economy.
The Finnish economy is in recession. It is also expected to remain weak in 2024. Inflation in Finland has nevertheless fallen, as anticipated, and the purchasing power of households has strengthened.
In Finland, variable rate mortgages are common, which to some extent is amplifying the impacts of monetary policy on economic growth and inflation. A key factor is the extent to which households have a financial margin to use as a buffer against increases in their loan servicing costs.
Bringing Finland’s public finances onto a different path has proven more challenging than expected. The Government is planning major cuts in public expenditure, but the level of public spending in the immediate years ahead will nevertheless still exceed public revenues.
Fluctuations in the current account are caused by energy prices, in particular. An increase in domestic electricity production will not be enough alone to turn the energy account around into surplus. The deep deficit on the services account will not necessarily be improved quickly.
Almost all forecasters inside and outside of Russia foresaw a much deeper contraction, reflecting the fact that the new packages of Western sanctions and Russia’s actions were unprecedented.
A weak economic environment calls for a sustainable and long-term economic policy. Finland has every opportunity to succeed if debt sustainability is taken as a common goal and a firm commitment is made to this across parliamentary terms.
The economy is performing weakly, and there are a number of reasons for this. Higher prices and interest rates continue to be a strain on household consumption. Investment is low. Residential construction, for example, is on hold. Consolidating Finland’s public finances is more challenging than expected.
Finland’s economy is in recession Finland’s economy is in recession and will not start to pick up until and will not start to pick up until the end of 2024.
Euro area GDP growth has been sluggish this year. Inflation has slowed with the easing of the energy crisis. The European Central Bank has raised its key interest rates, which has reduced upward pressures on prices.
Inflation expectations are of key significance for price trends. Expectations regarding the future rate of inflation will affect price setting by businesses and the wage demands of employees.
The Finnish economy is in mild recession. The rise in prices and interest rates, and weaker export demand, are weighing on the economy, and recovery from the recession will be slow.
Euro area inflation has been too high for too long. The European Central Bank’s interest rate decisions have reduced consumer, business and market expectations of high inflation in the future.
Converting data into useful information is one of the strengths of the Bank of Finland and the Finnish Financial Supervisory Authority (FIN-FSA). The Bank of Finland and the FIN-FSA have introduced a joint centre of excellence for advanced data science – the Analytics Center of Excellence, or ACE for short.
Last December, the ECB announced that it will review how it is to control interest rates in the future. The outcome of the review will also impact the size and composition of the Eurosystem’s balance sheet in the future.
In recent years, with the ECB’s asset purchase programmes and credit granted to banks, the ECB’s deposit facility rate has become the principal policy rate. The gradual reduction in the asset purchase programmes and in the volume of credit have prompted the ECB to review how it will control short-term money market interest rates in the future.
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