Finnish economic growth will almost grind to a halt in 2023 while inflation is set to remain high as Russia’s war on Ukraine takes effect, the Bank of Finland said on Tuesday.
The central bank currently expects growth at 1.7% this year, still within the 0.5% to 2% range it estimated in March, but the expansion will decelerate to 0.5% next year, it said in a statement.
Inflation in the Nordic nation is presently seen as 5.6% this year, more than the 4% to 5% range given previously before slowing to 2.4% in 2023, still beyond the European Central Bank’s 2% target for the 19-nation currency bloc.
Bank of Finland Head of Forecasting Meri Obstbaum said:
“Supply chain bottlenecks and high raw material prices are pushing up inflation. Inflation is projected to slow next year as the impact of energy prices subsides and supply chain disruptions are expected to ease.”
Risks to the growth estimate are a disadvantage, however, and the actual outcome could be severe, the bank added.
The bank added:
“Growth in the Finnish economy may fall short of the forecast, especially if disruptions in the availability of commodities and goods persist and price pressures fail to subside. In the worst-case scenario, the entire euro area may fall into recession.”