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Finance Ministry upgrades economic forecast in shadow of Covid-19

GDP will shrink by 4.5 percent this year instead of a previous estimate of six percent, according to the ministry.

Rekkojen perävaunuja Hangon satamassa.
The rest of the year will continue to be difficult for exports and industry, the ministry said. Image: Petteri Bülow / Yle
Yle News

The Finnish economy has reached another turning point and is recovering gradually and slowly, the Finance Ministry said in a new economic survey published on Monday.

Despite positive signs of recovery however, there is much uncertainty in the forecast, ministry economists said. According to the outlook, the economy is expected to contract by 4.5 percent this year, instead of the six percent predicted during the summer.

Meanwhile GDP is projected to grow 2.6 percent next year and 1.7 percent in 2022. Department head and senior director Mikko Spolander said that there is a risk that recovery will be delayed if households and businesses continue to be pessimistic about the economy.

"Only effective treatment and a vaccine [for the virus] will bring a clearer outlook," he said in a statement, describing these prospects as a positive risk.

The ministry said that the rest of the year will be especially difficult for exports and industry.

"The uncertainty caused by the pandemic is slowing the growth in foreign demand in many sectors that are important for Finland's exports, and as a consequence exports will continue to decrease further this year," it said in the same statement.

The impact of slower global demand as a result of the pandemic will also affect the industrial sector, although the outlook for business and IT services will be somewhat more optimistic.

Nevertheless the ministry said that the pandemic had been less harmful to the Finnish economy than to many others in Europe.

There is still cause for concern though, as employment in Finland will continue to decline as the year progresses and the employment rate will reach 71.5 percent at most in 2022. Meanwhile the general budget deficit will expand sharply to roughly 18 million euros and the ratio of government debt to GDP will also grow rapidly.

According to the Finance Ministry, there is a considerable risk that the Covid-19 epidemic will surge once more, suggesting that a return to normal is still a long way off.

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