Finland’s economy to shrink 0.5% in ’24, slow recovery ahead

The Finnish economy is expected to contract by 0.5 per cent in 2024, with a slow recovery projected, according to the Bank of Finland’s interim forecast published on Monday. The economy is anticipated to grow by 1.1 per cent in 2025 and 1.8 per cent in 2026.

Early 2024 saw subdued economic growth, with weak private consumption and investment, relying heavily on exports and public demand. The labour market has been impacted by the slow economy, and inflation has slowed significantly.

The recovery will be supported by improved employment, moderate inflation, rising earnings, and a stronger euro area economy.

Inflation is forecasted at 1.1 per cent for 2024, and is expected to rose to 1.8 per cent in 2025 before falling to 1.6 per cent in 2026. The unemployment rate is expected to rise to 8.3 per cent in 2024 but will decline as the economy improves.

Risks to the forecast include geopolitical tensions and domestic consumer caution. However, positive surprises, such as a quicker consumer confidence recovery and a faster rebound in construction, could boost growth.