The Ministry of Finance is poised to downgrade its economic growth forecast for Finland.

Information obtained by Helsingin Sanomat indicates that the Ministry of Finance estimates in its newly-finalised, yet-to-be-published economic forecast that the national economy will contract by 0.2 per cent in 2015. The ministry predicted as recently as in June that the national economy would expand by 0.3 per cent this year.

The economic doom and gloom has also affected the forecast for 2016. The Ministry of Finance is believed to be poised to downgrade its growth forecast for next year from 1.4 per cent to roughly 1.0 per cent.

The employment situation has similarly deteriorated: the unemployment rate is expected to rise to around ten per cent.

The updated forecast will be taken into account in the budgetary frameworks to be unveiled this week and widen the budget deficit further. The updated economic forecast is not scheduled for its official publication until 28 September.

Mika Kuismanen, the head of forecasting at the Ministry of Finance, refuses to disclose the most recent figures but confirms that the updated forecast is bleaker than the one unveiled in June. “There has been pressure to lower the growth forecast especially for this year. The outlook has deteriorated. New statistical data collected during the ongoing year show that we've already gone through two quarters of negative growth this year,” he tells.

Kuismanen also concedes that the employment situation has exacerbated and is likely to remain difficult for another couple of years.

“The situation in the labour markets is bad. Unemployment will gnaw away at the economy in the years to come. Long-term unemployment among the 25—54-year-old population, people in the best working age, has increased rapidly.”

The so-called broad unemployment has similarly crept up to nearly 17 per cent. “A total of 480,000 people are already without a job if we also take into account people covered by the variety of employment services,” points out Kuismanen.

Finland has also slipped into deflation, with inflation slowing down to -0.2 per cent. Consumer prices are as a result on the decline.

“The phenomenon isn't expected to last very long. We'll be back on the right side of zero next year,” predicts Kuismanen.

Deflation signifies, for example, that the various social security benefits that are based on the cost-of-living index, such as pensions and child benefits, should be slashed. The Government, however, is according to information obtained by Helsingin Sanomat drafting a legislative change in order not to have to apply negative indices to the benefits.

The benefits are therefore likely to remain unchanged.

Eeva Palojärvi – HS
Aleksi Teivainen – HT