HELSINKI, March 17 (Xinhua) -- The performance of Finland's economy will continue to be "very weak" in 2023, the Bank of Finland said in its interim forecast published on Friday, adding that turbulence in international financial markets could lead to weaker than expected growth.
The central bank said that the country's economy slipped into recession last autumn as a result of the energy crisis brought on by the conflict in Ukraine. The full impact of the unusually high inflation and the sharply rising interest rates will take time to manifest itself in the economy.
"Finland's economy has held up so far despite the difficulties, but the full effects of high inflation and elevated interest rates have not been seen yet. Risks in the global economy have also grown again in just the past few days," said Meri Obstbaum, head of forecasting at the Bank of Finland.
Finland's economy grew by 2.1 percent in 2022 due to a strong start to the year, but the Ukraine conflict and the energy crisis have reversed the trend, the bank said.
The country's economy will contract by 0.2 percent in 2023, according to the interim forecast. Growth will then be at a fairly weak level in the immediate years ahead, as the forecast assumes interest rates will remain elevated and no quick recovery is expected in demand for Finnish exports.
According to the forecast, Finland's economy will grow by 0.9 percent in 2024 and 1.5 percent in 2025.
As energy prices dropped sharply towards the end of 2022, this year the upward pressure on consumer prices will ease and the inflation rate will fall to 4.6 percent in 2023 and continue to decrease to 2.0 percent in 2024.
The bank expects the stagnation in economic growth to be of short duration, and employment, therefore, to remain strong in the coming years.
Nevertheless, risks in financial conditions, the energy markets and the persistence of high inflation could exacerbate economic uncertainty, causing the country's economic growth to be weaker than expected, the Bank of Finland said. ■