The economic downturn in 2020 will be smaller in Finland than in the rest of the euro area, but this winter will still be difficult. Private consumption will cause an upturn in growth in 2021, but long-term growth prospects are 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.

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.

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.

The euro area economy contracted 15% in the first half of the year. Rapid and powerful economic policy measures have mitigated the damage caused by the pandemic, but there is still substantial uncertainty and recovery will take time.

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.

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.