Finland's economic growth will be close to zero this and next year, according to the Bank of Finland's economic forecast for 2023-2025, which was published on Tuesday.
The Finnish economy will contract by 0.4 percent this year, "as a return to growth is being deferred by the rise in prices, tighter monetary policy and weak export demand. Inflation is nevertheless slowing down this year, and this is already improving household purchasing power," according to a press release.
Meanwhile, growth will pick up next year to 0.9 percent, the central bank said.
It noted that raised interest rates will keep investment and consumer spending down "in the immediate years ahead," adding that the economy will grow by 1.5 percent in 2025.
The recent decline in energy prices will help to subdue inflation, according to the forecast, which added that inflation rate growth will start to subside next year to 1.3 percent, due to tighter monetary policy "beginning to bite."
"However, underlying inflation, which measures price movements in consumer goods and services, will fall only after some delay, as wage increases and rent rises will maintain inflation in service prices. Employees' earnings will rise briskly in the immediate years ahead, and real earnings will grow," the central bank's release said.
The BoF further added that inflation will continue and that "the fight against inflation is not over yet, and the lending rates for households and businesses will, for the time being, remain above the level that people have viewed as normal in recent years."
The forecast also called for weak growth in Finland's main export markets, but the employment situation will be one positive aspect of the country's economic situation, according to the central bank's head of forecasting, Meri Obstbaum.
"Employment will remain a bright spot in the economy, although the labour market will, for a period, just be stepping back from its peak vitality," Obstbaum said in the release.