According to Aktia’s Chief Economist Lasse Corin, the coronavirus pandemic was a deep and short shock for the economy, whereas Russia’s attack on Ukraine will cause a less deep but drawn out period of uncertainty. He predicts a very moderate economic growth for next year.
In the economic forecast published today by Aktia, Chief Economist Lasse Corin predicts that the economic growth will slow down to 1.6% this year and be a modest 0.9% next year. “As the coronavirus pandemic and its economic impact has been driven to the background, Russia's attack on Ukraine plunged the world economy into a new period of uncertainty,” says Lasse Corin.
The Finnish export and industry survived the pandemic with little damage because Finland produces various kinds of investment and industrial commodities for foreign companies. The current situation is different. “We expect the economic uncertainty caused by the war to be clearly more drawn out, which weakens the willingness of foreign companies to invest and, consequently, the export prospects of Finnish companies,” says Corin.
There is also a small gleam of hope on the horizon of Finland's exports. The depreciation of the euro will improve the competitiveness of Finnish export companies and soften the blow to their economies.
As far as imports are concerned, Corin sees that the greatest risk is related to the availability of imported goods rather than the increase in import prices.
The strain on the growth of private consumption this year and next year is caused by more than one factor, but consumption also has one obvious stimulus. “The balancing of the uncertainty and the inflation risks comes from service consumption. The corona restrictions have been dismantled and consumers can finally eat out and use other services The growth in service consumption will balance the otherwise weak outlook for consumption. However, it is important to remember that the coronavirus has not been defeated for good and the recovery of the demand for services requires that the pandemic remains under control,” Corin points out.
In Finland, the acceleration of inflation is mainly due to the rising prices of imported products and not due to the exceptionally high domestic demand, unlike in the United States. Corin predicts that consumer prices will increase, i.e. that inflation will occur, by 5.1% in 2022 and slow down to 1.9% in 2023. “Finland is a small country. We have no option but to embrace the price development of the global market with open arms, and that is what the high inflation rates in Finland are all about,” says Corin.