Economy recovering rapidly, but fastest growth is over

The Finnish economy will continue to grow at a rate of 2.9% in 2022 following recovery from the COVID-19 pandemic, estimates the Ministry of Finance in its Economic Survey published on Monday.

The economy has been recovering rapidly from the COVID-19 pandemic since spring this year, said the Ministry in a press release referring to the forecast.

The growth spurt was triggered by the release of pent-up demand in a situation where the vaccination programme is progressing rapidly, restrictions on business activities are eased, and both households and companies are optimistic about the future.

Economic recovery will continue in the autumn, especially in the sectors that are currently subject to COVID-19 restrictions.

As a result, economic growth will remain strong during the second half of the year and will continue in 2022. Gross domestic product (GDP) is forecast to grow by 3.3% this year, by 2.9% in 2022 and by 1.4% in 2023.

In the forecast, economic recovery is not expected to slow down in the event of potential deterioration of the COVID-19 situation, even if the re-opening of society was slower than anticipated in the summer forecast. Uncertainties arising from the COVID-19 scenarios, virus mutations and vaccination coverage add to the uncertainty of the forecast.

The imbalance in general government finances will narrow this year and next as the economy grows rapidly and the expenditure needs arising from the epidemic decrease. However, general government finances will still remain in deficit after a short period of economic upturn.

“The upturn is part of the natural economic cycle following a dramatic blow and recovery from it. In the longer term, it is essential to use structural policy instruments to support employment, investments, productivity, competitiveness and stable public finances,” said Mikko Spolander, Director General of the Budget Department of the Ministry of Finance.