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Bank of Finland: Recession smaller than feared, but slow recovery ahead

The bank also warned of a long-term deterioration in Finland's employment market.

Ihmisiä kauppakeskus Itiksessä Helsingissä 20. heinäkuuta
The bank said economic uncertainty continues to slow household consumption and corporate investments. Image: Roni Rekomaa / Lehtikuva

The economic recession in Finland will be less severe than earlier forecast, according to an interim forecast by the Bank of Finland (BoF), published Monday.

The central bank said it expected the national economy to shrink by 4.7 percent during this year. Meanwhile the bank projected that the economy will grow by 2.7 percent in 2021 and grow by 2.4 percent the following year.

The BoF said Finland's economic development during the coronavirus crisis was not as weak as in many other countries, but that it was still facing a deep recession.

Because the pandemic is still ongoing, there will be continued economic uncertainty, the bank said, which is why an economic recovery is expected to be slow.

Recession "exceptionally global"

The bank said such uncertainty continues to slow household consumption and corporate investments.

Additionally, recovery will be hampered by the fact that the recession is "exceptionally global," making the international business environment difficult, according to the bank. The bank's outlook for foreign trade will be weak in coming years, due to uncertainty around the world as well as declining investments in Finnish exports.

The bank also warned of a long-term deterioration in Finland's employment market, saying that the labour market was hit particularly hard by the coronavirus crisis. The institution said that it expected the country's employment rate will be "significantly below pre-pandemic levels," with an forecasted employment rate of around 71 percent in 2022.

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