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OP forecast: Finland set for biggest economic boom since late 1980s

Despite the uncertainty caused by the Covid pandemic and Omicron variant, economists estimate that the Finnish economy will recover faster than expected.

Exports, investment and private consumption are expected to continue to grow this year and into 2023, the financial group OP has predicted. Image: Tiina Jutila / Yle

Finland's gross domestic product (GDP) will grow by 2.7 percent this year, according to an economic forecast released by the OP-Pohjola Financial group (OP), despite the challenges faced by the ongoing pandemic and the emergence of the Omicron variant of coronavirus.

OP's economists predict that an increase in Covid infections will weaken Finland's economic development only temporarily, in the early part of this year. Economic recovery will then continue towards the end of 2022, and at an even faster pace than previously predicted.

"Time after time each wave of coronavirus infections has had less and less of an impact on the economy. This time too, it is likely that the Omicron wave will mainly slow economic development rather than change the bigger picture of the economy," says OP Group's Chief Economist Reijo Heiskanen in a press release.

The group's forecast predicts that the improvement in economic growth during the second half of this year will continue into 2023, with GDP next year expected to grow by 1.7 percent instead of the previously forecast 1.4 percent.

"There is an exceptional inconsistency in the economy. The general climate exudes uncertainty, and some companies are suffering a lot from the Covid pandemic, but according to all the indicators of the overall economy, in 2022–2023 we will live in the strongest boom since the late 1980s," Heiskanen wrote.

Employment is projected to continue to improve, with the unemployment rate falling to 6.3 percent in 2023, the lowest level since 1990.

Economic indicators remain positive

Although the worsening of the pandemic situation and rapid rise of infections is once again hitting parts of the economy, OP said that overall economic indicators have remained broadly positive.

"Much of the economy is still recovering from the downturn in the service sector caused by the Covid pandemic. However, it is gratifying to see that industrial expansion investment is gaining momentum. It can also raise longer-term growth prospects," Heiskanen added.

According to OP's forecast, the growth of the Finnish economy will be wide-ranging this year and into 2023, with exports, investment and private consumption expected to continue to grow.

Inflation set to slow down during 2022

OP is also predicting the record-high level of inflation in the eurozone area to slow down during this year, but will remain higher than in the years prior to the pandemic.

Although inflation rose sharply at the end of last year, especially due to higher energy prices, the rise in consumer prices in Finland at the end of 2021 was one of the lowest in the eurozone area.

OP's economists forecast that inflation in Finland will average 2.7 percent this year and slow down to just under 2 percent in 2023.