Economic outlook

Most Finnish companies have suffered a drop in turnover as a result of the corona crisis. Service industries are hard pressed. Cost adjustments and funding arrangements have saved jobs.

The Finnish economy will contract by around 7% this year and grow around 3% per annum over the next 2 years. The forecast contains a large degree of uncertainty – the contraction could be only 5% or as much as 11%, depending on how the pandemic develops. See forecast tables for the Finnish economy in 2020–2022 (June 2020).

The corona crisis will have a deep impact on the Finnish economy. Exports are importnt to Finland, and the contraction in exports will damage the economy. With households also consuming less, businesses, and therefore employment, will suffer.

The Bank of Finland estimate puts the sustainability gap in Finland’s public finances at 4.7%. If public expenditures over the long term continue to be larger than revenues, public debt will eventually begin to grow out of control.

Global uncertainties are weakening investment growth in Finland. A similar effect is being exerted by structural factors in the domestic economy.

Finland’s economic boom is over and growth will slow temporarily, in step with global developments. The foundations for continued growth are, however, still in place. Monetary policy continues to be accommodative, and households’ purchasing power is growing.

The alternative scenario attached to the forecast for the Finnish economy analyses what implications a delay in the recovery of the global economy would have for the Finnish economy.

Fiscal buffers should be accumulated when the economic situation is relatively bright. This would help to reduce the sustainability gap in the public finances and improve readiness for future recessions.