Finnish economy to contract by 7 pct this year: Bank of Finland

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HELSINKI, June 9 (Xinhua) -- The Finnish economy will contract sharply by around 7 percent in 2020, mainly due to the COVID-19 pandemic, and a rapid recovery does not look very likely, announced the Bank of Finland (BOF) in its economic forecast published on Tuesday.

According to the forecast for the period 2020-2022, The Finnish economy will contract by 7 percent in 2020, and for 2021 and 2022, the growth forecast is about 3 percent annually.

The economic prospects, both globally and in Finland, have weakened rapidly during the pandemic this spring, noted BOF.

"The outlook for the Finnish economy is overshadowed by both the weakness of the global economy and the restrictive measures introduced domestically. Weakened household and business confidence in Finland is an additional factor that overshadows the prospects for growth," said Meri Obstbaum, head of forecasting at BOF on Tuesday.

However, the forecast contains an exceptional degree of uncertainty. According to the alternative scenarios, the contraction in the Finnish economy in 2020 could varies between 5 percent and 11 percent, depending on how the epidemic develops and how successfully it can be contained in different parts of the globe.

The major reasons for the downturn in 2020 is the strong contraction both in domestic demand and net exports. Meanwhile, the structure of the economy will turn towards increasing dependence on public demand, explained BOF.

As the COVID-19 crisis gradually vanishes, the economy will start to recover, led by private consumption. Nevertheless, foreign trade will not support the Finnish economy between 2020 to 2022, as the stagnation in global investment and Finland's weakening cost-competitiveness will make the export prospects very dim, according to the forecast.

In addition, even after the lifting of anti-epidemic restrictions, the common uncertainty will continue to reduce the growth in both consumption and investment. "It will probably not be possible to avoid permanent losses of output in Finland, but economic policy can be used to mitigate their scale," suggested Obstbaum.

The BOF warned that the general government financial balance will be worsened during the forecast period, saying the public debt will rise to 71 percent of GDP in 2020, and 75 percent in 2022. The debt ratio will continue to increase in the next few years. Enditem

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