Nordea has stated that additional adjustment measures are needed to address the trend of increasing public financial indebtedness. The bank has revised its forecast for Finland’s economic growth next year due to the government’s implementation of these measures, predicting that GDP will grow by 1.5 percent in 2025, lower than the previously estimated two percent.
The decision by Prime Minister Petteri Orpon’s government to raise taxes and cut spending is expected to strengthen the public finances by about three billion euros. Nordea anticipates a one percent shrinkage in Finland’s GDP this year, with a return to growth expected later in the year. This forecast is more pessimistic compared to other financial forecasts announced recently.
Despite challenges in the housing market and weakening consumer purchasing power, Nordea expects economic growth to be supported by slowing inflation, improving household purchasing power, and interest rate cuts by central banks. The bank also predicts a rise in private consumption this year alongside an improvement in export demand as global economic growth picks up.
Nordea suggests that these adjustments will help improve the balance of public finances next year and reverse the growth of debt ratio through a combination of economic growth and adaptation measures. While these measures may initially slow down economic growth, they are deemed necessary to address the increasing level of public financial indebtedness. Additionally, Nordea expects that real earnings growth next year will boost consumer confidence and support increased private consumption.
In conclusion, Nordea’s assessment highlights the need for additional adjustment measures to address public financial indebtedness and support economic growth in Finland. Despite challenges in the housing market and consumer purchasing power, the bank sees potential for improvements in economic indicators such as private consumption and export demand with the implementation of the government’s measures.