Business cycles OP forecasts that economic growth will continue – inflation will remain at a higher level than before the pandemic

OP’s economists estimate that increased corona infections will only weaken Finland’s economic development temporarily. According to the previous forecast, Finland’s gross domestic product will grow by 2.7 per cent in 2022, and towards the end of the year the economy will continue to recover slightly faster than previously estimated.

The improved mood in the second half of 2022 will also carry over to 2023, and OP’s economists forecast that GDP will grow by 1.7 per cent in 2023 instead of the previous 1.4 per cent.

“The waves of corona infection have time and time again had less of an impact on the economy. Once again, it is likely that the omicron wave will mainly rhythmize economic development rather than change the big picture of the economy, ”says OP Financial Group’s Chief Economist. Reijo Heiskanen in the bulletin.

According to Heiskanen, there is now a special disparity in the economy.

“The general climate is full of uncertainty and some companies are suffering a lot from the interest rate, but in 2022–2023 we will be experiencing the strongest boom since the end of the 1980s,” says Heiskanen.

Supreme According to OP’s forecast, the inflation peak is already behind us.

However, inflation would remain 2% higher throughout 2022: in 2022, OP ‘s economists forecast that inflation in Finland will average 2.7 per cent and slow down to just under 2 per cent in 2023.

In the euro area, inflation has accelerated to an all-time high of 5.0 per cent. OP forecasts that this will be downwards, but inflation is also forecast for 3.5 per cent next year.

“The risks of inflation exceeding the ECB’s 2% target in the longer term have clearly increased,” says a senior economist. Tomi Kortela.

OP forecasts that employment will continue to improve and that the unemployment rate will fall to 6.3 per cent in 2023, the lowest level since 1990. According to the forecast, public finances will still remain in deficit in 2023.

“

“Measured by the unemployment rate, economies are close to booming levels.”

In the world economy recovery from the exceptional crisis caused by the corona pandemic has been rapid but unbalanced.

This year and next, the global economy is gradually embarking on a more balanced growth trajectory. At the same time, economic growth will slow to an average rate, OP predicts.

“The economic situation is similar in most countries. The montage caused by the pandemic is moving directly to the peak of the business cycle. Measured by the unemployment rate, the economies are close to the peaks of the economic cycle, ”Heiskanen describes.

OP notes from its forecast that uncertainty remains high.

On the other hand, after a rapid recovery, the pace of the economy may slow rapidly due to capacity constraints, inflation and tightening policies. On the other hand, pent-up demand, increasing investment and growth-friendly economic policies may also lead to longer-than-expected growth.

“All that is certain is that the current situation does not resemble a normal economic recovery or a boom situation,” OP states in a press release.