THE FINNISH ECONOMY will slide into recession due to the coronavirus pandemic, states the Bank of Finland.
The Bank of Finland on Wednesday reported that the economy will contract this year due to a decline in demand for exports, but the depth of the recession will depend on how much households tighten their purse strings and how badly the production chains of businesses are disrupted by the outbreak.
The forecast unusually lays out two possible scenarios for economic growth amid the coronavirus pandemic.
The first is based on the assumption that the coronavirus will spread widely within the main economies of the world, substantially reducing global demand for exports and resulting in an economic contraction of 1.5 per cent in Finland. The effects of the pandemic on economic growth can, however, be contained.
The second is based also on the assumption that household consumption will decrease sharply and the production chains of domestic businesses will be disrupted by the wide range of counter-measures adopted in Finland. The Finnish economy is projected to contract by four per cent in this scenario.
The impact of developments in the second scenario has been estimated with the help of economic data from China between January and February.
The Bank of Finland on Wednesday reminded that the outlook for the national economy this year was bleak to begin with, after growth slowed down and eventually turned negative in the final quarter of 2019.
Private consumption, it highlighted, was sluggish and business investments on the decline despite the increase in purchasing power and improved profitability of businesses.
The Bank of Finland reminded that the economic impact of the coronavirus pandemic is expected to be temporary and the economy is expected to return to a growth path towards the end of this year, provided that policy makers succeed in preventing a wave of bankruptcies and surge in unemployment due to the current emergency shutdown.
Aleksi Teivainen – HT
Source: Uusi Suomi