Finnish economy to fall into mild recession: OP

OP Financial Group economists forecast that the gross domestic product (GDP) of counties in Finland will grow at a slower pace this and next year compared with the previous years’ average, said OP in a press release on Wednesday.

According to the forecast, unemployment should increase only moderately, and in several counties the unemployment rate is expected to decrease. In addition to the economic situation, population development chiefly sets conditions for the counties’ economic development.

Finnish economic development will also be reflected in the counties’ economic outlook. OP Financial Group’s economists forecast that Finnish GDP should this year decrease by 0.8 per cent on a year earlier.

A fall in purchasing power and a rise in interest rates are expected to drive the economy into a mild recession.

“The Finnish economy has so far managed reasonably well. The economy is affected by many factors and their combined effects and timing are hard to predict. But it still seems more likely that the economy will slowly go into recession this year,” said Reijo Heiskanen, OP Financial Group’s Chief Economist.

In the counties, economic growth is expected to be slower this and next year than the average of the last five years. In some counties, such as Uusimaa, Pirkanmaa, North Ostrobothnia and South Karelia, GDP growth is predicted to turn positive next year. In other counties, GDP is predicted to decrease in 2024 as well.

“This year, GDP is expected to shrink in all Finnish counties but should return positive or close to zero next year. There are no signs of a major GDP fall in the counties,” said Tomi Kortela, OP’s Senior Economist.

Between 2022 and 2024, the average annual growth rate in the counties is predicted to vary from growth of a slightly over 1.0 per cent to a decline of up to 1.0 per cent. During the same period, the Finnish economy is expected to grow by 0.5 per cent.

Differences in economic development between the counties have been large in the 2000s and the forecast development will follow the trends witnessed during the last few years.