Better times are expected for the Finnish economy next year, economists estimate

Finland the economy will do better next year than last year, but it is still too early to assess how strong the turnaround will be, say economists.

Chief Economist of the Central Chamber of Commerce Jukka Appelqvist’s basic assessment is cautiously optimistic about next year, when wages continue to rise and households’ savings buffers have been fixed. According to Appelqvist, unemployment will probably hit rock bottom soon.

“Even though wage earners’ incomes have been on a growth path for a long time, so far the money has been mainly channeled into an increase in the savings rate, while households’ moods have been unnecessarily cautious,” Appelqvist says in the announcement.

Both households and businesses benefit from falling interest rates. However, a quick increase in exports is not expected, because the industry in the euro area is still having difficulties.

“Gradually the situation will still improve, and the year as a whole will be brighter. In fact, despite the unusual risks of the global economy, it seems that from the perspective of the Finnish economy, next year may turn out to be rather ordinary. Compared to the previous couple of years, that would be a really good result,” sums up Appelqvist.

Export- and the chief economist of growth financier Finnvera Mauri Kotamäki that statesthat the export-led growth of the Finnish economy is still on a fragile foundation. However, the Finnish forecasting institutes predict rapid economic growth of 1–2 percent by Finnish standards for the coming year.

“A certain optimism is justified – especially when the inflation rate and interest rate have normalized. Often after a period of weak growth, we see a phenomenon where economic growth is exceptionally fast for a short period of time. This was also the case with the growth spurt in 2021 after the initial phase of the pandemic,” Kotamäki reminds in the announcement.

After the financial crisis of 2008–09, Finland was also expected to pick up economic growth, but instead we got a period of many years when economic growth was slightly negative or close to zero. The risk factors are still the aging of the population, weak productivity development, the difficult situation of the public finances and global uncertainty.

Finland’s economy still has a lot of potential when interest rates fall and inflation stabilizes, says Kotamäki.

“There are also plenty of structural and longer-term opportunities: growth in immigration, which hopefully will continue, versatile energy production as an attractor of foreign investments, labor market reforms and adjustment of public finances,” Kotamäki lists.

It takes time for the potential to be realized, Kotamäki estimates, so a sharp increase in economic growth is not expected.

“Any economic growth of more than one percent can be considered a positive surprise compared to the present,” says Kotamäki.