Forecast: Finland’s coronavirus economic recovery will be slow

Although the economy is predicted to improve in 2021, a lot depends on issues like a second wave of the pandemic and how it might affect the country's finances.

Coronavirus economics graphic

A new forecast from the Ministry of Finance predicts that Finland’s recovery from the economic damage caused by the global coronavirus pandemic will be slow.

The report, published on Tuesday, says the economy will shrink by 6% this year as a direct result of measures taken to slow the spread of Covid-19. However with restrictions easing from the beginning of June, experts say it will help to boost economic activity especially in the service sector.

By the end of this year the economy will have started to pick up slowly, and then in 2021 Finland’s gross domestic product GDP is forecast to grow by 2.5% (and by 1.7% the year after that).

There’s more concern expressed however about the debt which is being taken on by the Government’s measures to bail out different sectors and provide financial assistance to businesses and individuals most in need of help.

“The financial support for businesses and for employment and economic activity will get us through the crisis, but this support also weakens public finances considerably” says Mikko Spolander, Director General of the Economics Department at the Ministry of Finance.

“Besides recovery and rebuilding, we need to decide soon on measures to stabilise the long-term management of public finances” he adds.

The uncertainty over Finland’s economic outlook matches the uncertainty over what happens next with coronavirus – whether there will be a second wave in Finland or Europe, when a vaccine might be developed, and when it will be available for use.

The extent of the economic impact a second wave would bring, says the Ministry of Finance, would depend not only on the measures the government already took to mitigate the epidemic and support the economy, but on how these action affect the economy all around the country.