PARIS (MNI) – A further escalation of the Eurozone debt crisis
would hit Finland’s already slowing economy “very hard indeed,” the Bank
of Finland said on Thursday.
In its Economic Outlook report, the Finnish central bank said that
growth in the country’s economy would slow from 2.8% in 2011 to 0.4% in
2012, before rebounding in 2013.
“If the debt crisis were to escalate into an ungovernable crisis
affecting the entire euro area and — via financial sector interlinkages
and international trade — into a global crisis, this would in all
probability hit the Finnish economy very hard indeed,” the report said.
In a statement, Bank of Finland Governor Erkki Liikanen said the
economic forecast was based on the assumption that the “debt crisis will
not get any worse and the slowdown in growth in both the euro area and
the global economy will be relatively short-lived. This assumption
contains a clear downside risk for the forecast.”
The bank said the deteriorating economic outlook will require
Finland to take steps to reverse the upward trend in its debt-to-GDP
ratio. The bank’s forecast calls for Finland’s general government debt
to rise to 55.9% of GDP in 2013 from 50.0% this year.
Finland still has time to take these measures in a “controlled,
carefully planned” way, the bank said. But Liikanen warned that “if
these steps are not taken in time, we could end up in a situation where
we are forced to rapidly reduce the general government deficit at a time
when economic growth is weakening.”
The bank said that the rise in Finish inflation an estimated 3.4%
in 2011 came from higher costs of energy, commodities and indirect
taxation. It said inflation would slow to 2.5% in 2012 and 1.7% in 2013.
–Paris Newsroom, +33142715540; jduffy@marketnews.com
[TOPICS: M$$CR$,MFX$$$,M$X$$$,MGX$$$]
