There is ongoing debate among forecasters regarding the possibility of deflation in Finland this year. While Hypo predicts a temporary drop in inflation, Nordea and the OP group do not anticipate deflation. According to Hypo, deflation may occur in the fall due to various factors, such as the increase in value-added tax and corrections to the electricity price index.
However, other economists argue that official statistics are hiding a hidden deflation that could affect the Finnish economy. The impact of loan interest on national consumer price indexes is being removed, making it difficult for policymakers to detect potential deflationary pressures. However, these experts believe that factors such as the VAT increase and correction to the electricity price index will boost inflation numbers.
The VAT increase, which takes effect in September, and the correction made by Statistics Finland regarding the electricity price index are expected to offset any potential for deflation in Finland. The correction made by Statistics Finland is forecasted to significantly increase inflation figures from the fall onwards. Despite concerns about deflation, especially during economic downturns, economists believe that inflationary effects from these factors will prevent negative inflation numbers in Finland.
