Friday, December 8, 2023

OP predicts moderate recession this year


Consumer prices are projected to increase by 5.9 percent this year and 2.3 percent next year.

Economists from OP Group forecast that the Finnish economy will plunge into a moderate recession this year. Gross National Product is estimated to decrease by 0.8 percent this year and increase by 0.3 percent next year.

Earlier, a contraction of 0.5 per cent was predicted for this year and a growth of 0.5 per cent for the next.

The big picture of the economy hasn’t fundamentally changed. It is still a moderate recession. However, the rapid rise in interest rates has hit residential construction especially hard, and construction investments are taking a dive more rapidly than before, says Rijo Hiskanen, OP Group’s chief economist in the press release.

Construction investment is expected to decline by 8.5 percent this year and 2 percent next year.

Based on payment card data, private consumption declined during the spring, while it increased at the beginning of the year compared to last year.

OP’s economists forecast that private consumption will decline by another percentage point this year. This is justified by the fact that savings can no longer be relied upon, and disposable real income does not increase.

Consumer prices are projected to increase by 5.9 percent this year and 2.3 percent next year.

Looking at the risks to the economy, the risk of recession has waned. The economy is unlikely to drift into a prolonged period of high inflation and unemployment. In the context of economic development, risk is the combined effect of several factors formed during the crisis, the crisis hangover. Hyskainen says the signs of this are already visible in the rising number of bankruptcies.

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