Finland's economy will gradually recover from the sudden shutdown

Healthy public finances provide an irreplaceable shield when we hit hard times. It is important to focus the fiscal policy stimulus effectively and take forward structural reforms. Finland’s labour market, too, has a vital role to play as the economy enters the recovery phase.

Consumer confidence has long been depressed by weak assessments of the outlook for the Finnish economy. Changes in consumer confidence can foreshadow a turning point in the economy and they therefore attract close attention.

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 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).

Financial institutions' solvency and liquidity positions have been strengthened since the global financial crisis. A well-functioning banking sector together with government relief measures will bolster the economy's outset for growth once the crisis subsides.

The European Commission, on Wednesday, published its proposal for a European recovery fund to help restart the economic engines in a Europe shaken by the coronavirus.

The coronavirus pandemic will further weaken the short-term profitability of banks. Government and central bank policy measures are mitigating the rise of funding costs and are bolstering lending capacity.

Regulatory reform has made banks more resilient than they were during the previous crisis. A robust lending capacity is now needed to help Finnish firms through the coronavirus crisis.

The coronavirus pandemic has the potential to aggravate long-standing vulnerabilities in the Nordic housing market. Housing market disturbances can increase credit risk for banks and interfere with their access to funding.