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.
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