Finland's economy shrinking 2% per month of lockdown: ministry

The coronavirus crisis will cause Finland's economy to shrink by 5.5 percent this year and its government deficit to increase tenfold, the country's finance ministry forecast on Thursday. 


In this file photo taken on March 28, 2020, a man wears a face mask as he does his shopping in a supermarket in Vaasa, Finland, on March 28, 2020, amid the coronavirus COVID-19 pandemic. (Photo: AFP)

Every month of the current lockdown measures, which have so far seen 100,000 workers temporarily laid off, is negatively impacting Finland's gross domestic product (GDP) by up to 2.0 percent, the ministry said, warning of a contraction of up to 12 percent if the restrictions end up lasting six months.

The impossibility of predicting the spread of the virus makes the current economic outlook "extremely uncertain", the ministry said.

"The danger is that the longer the economy suffers, the greater the difficulty in reviving it," Mikko Spolander of Finland's finance ministry said in a statement.

The ministry also said it expects unemployment to rise to 8 percent from its current 6.9 percent this year, after employment ministry figures suggested almost 400,000 jobs are in danger of being laid off in the country of 5.5 million people.  

Finance Minister Katri Kulmuni has said the government expects to release a total rescue package of 15 billion euros ($16.3 billion) during 2020.

The ministry forecast a return to 1.3 percent growth in each of the following two years as two key drivers of Finland's economy, the forestry and construction sectors, start to recover. 

But it predicted that any recovery would be slow to fix the hole in government finances, with the budget deficit rising almost tenfold to 16.6 billion euros this year, or 7.2 percent of GDP.

Government finances "will remain substantially in deficit in the coming years," the ministry said in a statement.