Suomen Pankki

Bank of Finland’s interim forecast: economic recovery will be delayed

Share

The Finnish economy is in mild recession in 2023, according to the Bank of Finland’s interim forecast published today. The rise in prices and interest rates, and weaker export demand, are weighing on the economy. The favourable trend in employment will come to a halt, but domestic inflation is now slowing rapidly. However, the economic recovery will take longer than previously estimated. The downside risks to economic growth have increased.

“The recession is still expected to be shallow, but the economy will also recover more slowly than estimated in the summer. Statistical data that became available in the summer indicate weak developments for the rest of the year. In addition, risks in the domestic and global economy have grown,” says Bank of Finland Head of Forecasting Meri Obstbaum.

According to the Bank of Finland’s September 2023 interim forecast, GDP will contract by 0.2% in 2023. The economy will slowly start to recover from the recession in 2024. GDP growth in 2024 will be slower than projected in the Bank of Finland’s June forecast, i.e. only 0.2%. In 2025, growth in the economy will gather pace, albeit only to 1.4%.

Inflation will slow significantly – employment rate will dip

Employment has been growing for a long time, but it will dip during the recession. The employment rate for the 20 to 64 age group will fall to 77.7% in 2024. The number of persons employed will resume growth in 2025 as economic growth strengthens, and the employment rate will return close to the level in 2022. Higher prices are eroding households’ purchasing power, but growth in earnings and falling inflation are improving their consumption opportunities. Inflation will slow to 1% in 2024, but the prices of services will continue to rise at a faster pace than previously expected.

The risks surrounding the forecast are predominantly on the downside. Geopolitical confrontations and the transmission of the rise in interest rates to the economy may lead to negative developments. Slower-than-expected growth in the global economy would further decrease Finnish companies’ opportunities for increasing exports. The higher interest rates are also curbing investment and affecting real estate market activity. In Finland, the outlook for residential construction has weakened rapidly due to the housing market freeze, and difficulties in the sector may come to a head and affect employment and the economy more strongly than projected.

Bank of Finland’s interim forecast, september 2023 (in Finnish)

Further information:

Meri Obstbaum, Head of Forecasting
firstname.lastname@bof.fi
+358 9 1832363

Keywords

Links

The Bank of Finland is the national monetary authority and central bank of Finland. At the same time, it is also a part of the Eurosystem, which is responsible for monetary policy and other central bank tasks in the euro area and administers use of the world’s second largest currency – the euro.

Subscribe to releases from Suomen Pankki

Subscribe to all the latest releases from Suomen Pankki by registering your e-mail address below. You can unsubscribe at any time.

Latest releases from Suomen Pankki

October 2023 sees low amount of corporate loan drawdowns30.11.2023 10:00:00 EET | Press release

In October 2023, non-financial corporations (excl. housing corporations) drew down new loans1 from banks operating in Finland to a total of EUR 1.3 billion – the smallest amount in October since 2010. The average interest rate on new corporate loans was 5.70%, up 0.18 percentage points on September 2023. Due to the low level of drawdowns, the stock of corporate loans (EUR 58.5 billion) contracted in October by 3.0% from a year earlier. The largest rise in the average interest rates on new corporate loans was seen in the category of large corporate loans, i.e. loans of over EUR 1 million. The average interest on these loans rose by 0.15 percentage points from September, to stand at 5.44% in October 2023. The average interest on small loans of less than EUR 250,000 was 6.32%, and the average interest on medium-sized loans (over EUR 250,000 and up to EUR 1 million) was 6.19%. Of the new corporate loans drawn down in October, 13.5% were taken out by firms in the manufacturing sector. This

Svag efterfrågan på företagslån i oktober 202330.11.2023 10:00:00 EET | Tiedote

I oktober 2023 utbetalades nya företagslån1 (exkl. bostadsbolagslån) av banker med verksamhet i Finland till ett värde av 1,3 miljarder euro. Det är det minsta statistikförda utbetalda beloppet för oktober sedan 2010. Genomsnittsräntan på nya företagslån var 5,70 %, vilket är 0,18 procentenheter högre än i september 2023. På grund av den svaga efterfrågan i oktober 2023 minskade det utestående beloppet av företagslån (58,5 miljarder euro) med –3,0 % jämfört med ett år tidigare. Genomsnittsräntan på nya företagslån steg mest i kategorin för stora lån på över 1 miljon euro. Genomsnittsräntan på dessa stora lån steg med 0,15 procentenheter från september och var 5,44 % i oktober 2023. I oktober var genomsnittsräntan 6,32 % på små lån under 250 000 euro och 6,19 % på medelstora lån (över 250 000 och högst 1 miljon euro). Av de nya utbetalda företagslånen i oktober 2023 hänförde sig 13,5 % till industrisektorn. Detta är mindre än normalt. Samtidigt var fastighetssektorns andel (21,9 %) av d

Yrityslainoja nostettu vähän lokakuussa 202330.11.2023 10:00:00 EET | Tiedote

Lokakuussa 2023 uusia yrityslainoja1 (pl. asuntoyhteisöt) nostettiin Suomessa toimivista pankeista 1,3 mrd. euron edestä. Se on pienin tilastoitu lokakuun nostomäärä sitten vuoden 2010. Uusien yrityslainojen keskikorko oli 5,70 %, mikä on 0,18 prosenttiyksikköä korkeampi kuin syyskuussa 2023. Vähäisten nostomäärien vuoksi lokakuussa 2023 yrityslainakanta (58,5 mrd. euroa) supistui −3,0 % vuoden takaisesta. Uusien yrityslainojen keskikorot nousivat eniten yli 1 milj. euron suuruisissa lainoissa. Näiden suurten lainojen keskikorko nousi 0,15 prosenttiyksikköä syyskuusta ja oli 5,44 % lokakuussa 2023. Lokakuussa pienten alle 250 000 euron lainojen keskikorko oli 6,32 % ja keskisuurten (yli 250 000 ja enintään 1 milj. euroa) lainojen keskikorko oli 6,19 %. Lokakuussa 2023 nostetuista uusista yrityslainoista 13,5 % kohdistui teollisuustoimialoille. Tämä on vähemmän kuin normaalisti. Vastaavasti kiinteistöalan osuus (21,9 %) uusista nostoista oli suurempi kuin yleensä. Lokakuussa 2023 nostet

Bank of Finland rules for counterparties and customers – Rules update 20 November 202320.11.2023 12:00:00 EET | News

On 7 September 2023 the Governing Council of the European Central Bank adopted Guideline (EU) 2023/2415) on a new-generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) amending Guideline (ECB/2022/8), (ECB/2023/22). The Bank of Finland has made corresponding additions and changes. The rules can be found in the collection of rules governing the TARGET- Suomen Pankki system, see Bank of Finland rules for counterparties and customers. These rules will come into force on 20 November 2023.

Finlands Banks regler för motparter och kunder – regeluppdatering 20.11.202320.11.2023 12:00:00 EET | Uutinen

ECB-rådet godkände den 7 september 2023 riktlinjen (EU) 2023/2415 om ändring av riktlinje (EU) 2022/912 om en ny version av det transeuropeiska automatiserade systemet för bruttoavveckling av betalningar i realtid (TARGET) (ECB/2022/8), (ECB/2023/22). Finlands Bank har gjort motsvarande tillägg och ändringar. De nya reglerna för TARGET-Suomen Pankki-systemet, se Finlands Banks regler för motparter och kunder. Dessa regler träder i kraft den 20 november 2023.

In our pressroom you can read all our latest releases, find our press contacts, images, documents and other relevant information about us.

Visit our pressroom