People in downtown Helsinki on Monday, 15 May 2023. Finns’ purchasing power is expected to start improving from the sharp drop witnessed last year in 2024, says an official at the Bank of Finland. (Emmi Korhonen – Lehtikuva)


THE PURCHASING POWER of Finns is projected to neither decrease nor increase this year, reports YLE.

Meri Obstbaum, the head of forecasting at the Bank of Finland, stated to the Finnish public broadcaster yesterday that the purchasing power is expected to start improving next year, returning to the upward trajectory it had been on – barring a couple of exceptions – for the past couple of decades.

The positive development came to an end last year due to the Russian invasion of Ukraine. The consequent supply shock drove up food, energy and fertiliser prices, contributing to an exceptional decline in the purchasing power of Finns. Statistics Finland has released preliminary data indicating that real income – nominal income adjusted for inflation – declined by 4.4 per cent in 2022, almost certainly the largest decline in more than 60 years.

Obstbaum on Monday reminded on YLE A-studio that the decline in purchasing power was mitigated by the solid employment situation and the savings many households had built up during the coronavirus pandemic.

“Also the rise in wages is having a supportive impact on purchasing power,” she commented.

Niku Määttänen, a professor of macroeconomics at the University of Helsinki, stated to Helsingin Sanomat on Monday that employment growth prevented the total wage sum of households from falling as steeply as the average wage.

“Looking at wage growth alone exaggerates the problem slightly,” he said.

He also pointed out that last year was truly unusual, a year of supply shocks. “It was a one-off drop in purchasing power. You can expect the development to be more positive from now on,” he said to the newspaper.

Statistics Finland on Monday published its most recent figures on consumer prices, revealing that food prices decreased by roughly a per cent from the previous month, the largest decrease since 2019. Fuel prices, similarly, have been on the decline since the start of the year, easing the financial situation of households.

The overall inflation rate did not change from the previous year, staying at 7.9 per cent in April.

The Bank of Finland is presently drafting its next economic forecast, which is scheduled for release in June. In March, the central bank forecast that inflation would slow down substantially this year.

“Next year and the one after that, inflation will be running at a clip of a few per cent,” Obstbaum said to YLE on Monday.

Aleksi Teivainen – HT