Forecast: The economy will recover from the pandemic, but even after recovery, growth will be slow

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 Bank of Finland forecast, the COVID-19 crisis is not expected to cause such a deep recession as experienced in the financial crisis, and recovery will be faster. The virus could, however, leave long-term scars on e.g. employment, the capital stock and productivity.

Debt will not be halted even when the economy begins to grow again. Moreover, the sustainability gap is now larger. A post-crisis change of direction in the public finances is required.

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.

On 24 November, Bank of Finland hosted a webinar focusing on monetary policy challenges both in the euro area and in the United States.

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