The Ministry of Finance has released its economic review for 2019, and forecasts the economy will shrink by 5.5% this year due to the coronavirus pandemic.
The ministry notes that the shift in fortunes for economies around the world because of the virus has been “unprecedented in its speed and scale.”
The lockdown measures that Finland has taken have “serious consequences” for Finland’s economic growth with the biggest drop in gross domestic product GDP expected to hit in the second quarter of this year (April, May and June) and then pick up after that. GDP is now forecast to grow by 1.3% in 2021 and 2022.
Finland financial deficit will rise by almost €14 billion to a total of €16.6 billion – or 7.2% of GDP.
“Everything depends on how deeply the economy plunges and how long it stays there” says Mikko Spolander, Director General of the Economics Department at the Ministry of Finance.
“The danger is that the longer the economy suffers, the greater the difficulty in reviving it” he adds.
Forecasting the future
The global economy had already started to slow down during the first quarter of this year as China went into lockdown to slow the spread of Covid-19, and the global economy is expected to shrink by 2% during 2020.
Ministry of Finance experts caution that there is “an exceptional degree of uncertainty” around economic forecasts at present because of the unknown duration and effects of the coronavirus pandemic, and how it might impact the economy in the coming weeks and months.
Forecasting is based on the assumption that the measures restricting economic activity in Finland will remain in place for three months.
“The further the virus spreads and the more people that are infected, and, in particular, the more extensive and long-term the restrictions are for containing the virus, the greater the negative impacts will be” says the ministry’s new report.
It is estimated that for each month of restrictions at their present level, Finland’s GDP will shrink by 1.5%–2.0%.