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Finnish Economy Enters Technical Recession Amid Inflation Spike

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Euro currency - Sputnik International, 1920, 07.03.2023
The decline, which is expected to last until the end of 2023, has been attributed to dwindling expectations among consumers and businesses amid soaring inflation that hamstrings their purchasing power.
The Finnish economy has been hit by a technical recession and a surge in inflation, Statistics Finland reported.
The Nordic nation's economy shrank by 0.2 percent in the fourth quarter of 2022, marking its second consecutive quarter of contraction — the textbook definition of a recession. The decline was attributed to flagging expectations among both consumers and businesses, which manifested themselves in the latter half of the year.
Inflation reached 8.4 percent in January, further hampering the purchasing power of consumers and businesses.
According to Statistics Finland, the conflict in Ukraine has also had an impact on the nation's economy. Between October and December 2022, the volume of Finnish exports decreased by 2.9 percent from the level in the previous quarter, whereas imports dropped by 2.4 percent.
In their latest forecast, the Finnish government and central bank envisaged a small decline in GDP in 2023 of around 0.2 percent, before a return to growth in 2024 and 2025. Still, experts warned of uncertainity due to unexpected circumstances and the margin of error in economic predictions.
The big picture for Finland's economy is that it is not expected to see any growth in the coming year at all. The impact of inflation and the economic fallout of the conflict in Ukraine and the sanctions war will take their toll on consumer and business confidence, further fueling the cost-of-living crisis.
While Helsinki’s economic woes are largely in line with those of the rest of the eurozone, Finland has been hit particularly badly by the EU's backfiring sanctions against Moscow due its historically close ties with Russia as a neighbor. Nevertheless, already at the start of the conflict, Helsinki made a public case of its refusal to comply with Moscow's demands to pay for gas in rubles — a decision that sent energy prices soaring and prompted a panic-buying spree.
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Finland's once mutually beneficial relations with Russia, which featured bustling trade and buoyant economic cooperation ever since the Soviet era, despite ideological differences, have suffered immensely as a result of Helsinki's further actions. The subsequent restrictions in travel and trade hit eastern Finland, traditionally reliant on deals with Russia and joint businesses, particularly hard.
Meanwhile, while neighboring Sweden hasn't seen two consecutive declines in GDP so far, its economy also shrank by 0.2 percent in the fourth quarter compared to the same period a year earlier, according to the nation's statistics bureau. The decline was also felt in many parts of the economy, affecting business investment and household consumption. The Swedish central bank expects the nation's GDP to fall by 1.1 percent this year, in line with the European average.
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