OP forecasts 3% growth for 2021, 2.6% for 2022

OP Financial Group’s economists forecast a 2.6 per cent growth of Finnish economy next year, said OP in a press release on Tuesday.

As in last autumn, they forecast a growth of 3.0 per cent for the period of 2021 to 2022, the rate of economic growth will exceed five per cent at its best, but it will decelerate towards the end of next year and remain below two per cent.

The economic recovery that started last summer slowed down during the winter as the COVID-19 pandemic tightened its grip. With the vaccination rates increasing, the economies in Finland and abroad will start to recover more strongly.

However, the boost brought about by the improvements in the health situation will be rather short-lived.

“The economic outlook is basically very clear. There will be stronger recovery as the COVID-19 pandemic wanes as a result of large vaccination coverage. Of course, there is still uncertainty related to the development of the pandemic itself. However, uncertainty concerning the economy will grow only after the boost following the recovery from the COVID-19 crisis is nearly over,” said OP Financial Group’s Chief Economist Reijo Heiskanen.

The service industry has suffered the most from the COVID-19 pandemic. Compared to service consumption and the export of services, the health situation has not had similar direct consequences to the development of industry and construction. For this reason, service sector development is the key to recovery.

At the end of last year, the export volume of goods already returned to the level preceding the crisis, and the future will largely depend on world trade.

The export of services, however, remained significantly below the pre-crisis level, and recovery will not pick up until the pandemic dies down.

The consumption of services will recover when the health situation improves. Overall, consumption will return to its starting level next winter. Accumulated savings and income development will enable even quicker recovery.

The recovery of labour markets have already started last year. The second wave of the COVID-19 may delay recovery, but when recovery accelerates, the employment rate will increase to 72.6 per cent next year, which is slightly above the 2019 level of 72.5 per cent. Next year, the unemployment rate will decrease to 7.2 per cent, which is somewhat higher than the 2019 level of 6.7 per cent, as the labour force percentage increases.

Compared to last year, the public deficit will decrease, but it will still remain above the three per cent limit next year. However, the current account is in balance, and there is reasonable overall financial equilibrium.

“This year and next year will mark the period for recovering from the COVID-19 crisis. After this – or perhaps already during next year – we will face reality and must adapt to it. One major concern is that export represents too small a share of our national product, which must not be forgotten even during the period of economic recovery,” added Heiskanen.