HIBAPRESS-RABAT
In Finland, domestic demand faces a challenging landscape in 2024, mainly due to the widespread use of variable interest rates. Households are struggling with the impact of rising rates that are impacting their consumption habits.
The high interest rate environment is expected to ease, which, together with lower inflation rates, should ease economic pressures and, therefore, support domestic demand.
However, aggregate demand will also be influenced by a weakened labor market, characterized by rising unemployment rates. The marginal improvement in household consumption projected for 2024 is attributed to a mix of lower interest rates and favorable real wage growth.
Despite the positive influence of the easing of interest rates and the boost given by real wage growth, the concomitant rise in unemployment casts a shadow over the overall impact of household consumption.
The economic landscape in 2024 will also be influenced by a government determined to limit the budget deficit, as reflected in its plans for spending cuts, fiscal adjustments and broader reforms. However, in the context of sluggish domestic and global activity, coupled with high interest rates, investment is set to decline further. Although Finland is not immune to the ongoing global economic slowdown, expectations are optimistic that the situation will improve. The impact of external headwinds will continue, but a gradual recovery is expected in the latter part of 2024.
