Economic policy in Finland must find a way to live in two time periods at once. While we are currently combating an acute crisis, we must at the same time direct our thinking strongly towards the economic challenges of the post-crisis years.

COVID-19 will gradually be left behind in the course of 2021 due to the vaccines, and private consumption will generate growth of 2.2% in the Finnish economy. This will strengthen to 2.5% in 2022.

Vaccines bring hope of an end to the COVID-19 crisis, but recovery will be slow. In the immediate years ahead, household consumption will drive the economy, but exports and investment will remain sluggish.

In the short term, the main uncertainty is how fast India recovers from the pandemic.

Is the euro area drifting into a liquidity trap (a combination of low interest rates and low inflation) as a consequence of the corona crisis? There is a heightened risk of this, but the policy measures taken are preventing negative trends.

The corona pandemic has seriously weakened the euro area economy and the outlook remains uncertain. Recovery will be affected by e.g. how successful the balance between the virus and the economy turns out to be, and how quickly confidence improves.

China was at the forefront of the COVID-19 crisis. As a consequence, the value of Chinese exports plummeted by 13% year-on-year at the first quarter of 2020.

Monetary accommodation has opened up space for other economic policies in the euro area, which needs to be put to good use by pursuing economic reforms. Productivity and employment growth ultimately rest on our ability to reform.

In recent years central banks have eased monetary policy by conducting large-scale asset purchases and offering banks credit on affordable terms. These measures promote price stability and facilitate economic growth and employment.

The Bank of Finland grants credit against collateral to Finnish banks. During the pandemic, credit operations have facilitated bank lending to businesses and households, and their uptake has been record-high.

In order for banks to obtain credit from the central bank, collateral is required. Collateral protects the central bank against risk. The ECB and Bank of Finland have eased their collateral requirements during the coronavirus pandemic.

The Bank of Finland manages about EUR 11 billion of financial assets. The Bank’s investment activities are guided by its central bank obligations and its ambitious principles of sustainable investing.

Recent changes in the implementation of monetary policy have strongly expanded the balance sheets of the Eurosystem central banks. At the same time, balance sheet risks have increased.

The Bank of Finland safeguards the operation of the Finnish payment system. Payment systems deliver transactions from one account to another, all the way from everyday retail payments to multi-billion euro transactions by banks.

Financial markets provide clues on the state of the economy and financing conditions. Crises emphasise the importance of market surveillance, as emerging problems in the economy and financial system are often first seen in markets.

Asset purchases have become an integral part of conducting monetary policy. The Bank of Finland implements the Eurosystem’s purchase programmes in Finland. Asset purchases lower interest rates in markets.