Helsinki, Dec 20 (IANS): The Bank of Finland and the Ministry of Finance have confirmed that the nation is currently in a recession.

Both authorities have defined the decline in the gross domestic product (GDP) this year as 0.5 per cent, but the Ministry is predicting a faster recovery from the slump next year, reports Xinhua news agency.

The Bank of Finland has predicted that the decline will continue next year by 0.2 per cent, whereas previously it had estimated a return to 0.9 per cent growth.

The Ministry of Finance also downgraded its earlier projection of one percent growth for 2024, settling on 0.7 per cent.

However, the Ministry improved its outlook for 2025 to 2.0 per cent from its previous 1.8 per cent forecast, while the Bank of Finland has predicted 1.5 per cent growth in 2025.

Both organisations have underlined the importance of the decline in inflation, and the increase in purchasing power.

The Ministry said real earnings will turn to growth in 2024, and although inflation will still be at 2 per cent in 2024, it will decline in 2025.

Bank of Finland's Head of Forecasting Meri Obstbaum noted that the current international economic environment is difficult, and the outlook for the Finnish economy worsened during the autumn.

However, inflation has fallen, and the purchasing power of households has increased.

The Bank said that the economy is suffering from diminished investments, especially in housing, and unemployment will temporarily increase.

Both organisations see the public sector economy worsening.

The Ministry has estimated that state and municipal total deficits in 2024 will grow to 3.5 per cent of the GDP from the current 2.5 per cent, with the financial problems of the new Finnish welfare regions being a contributing factor.

In a 2022 reform, responsibility for public health was shifted from municipalities to regional entities, which receive funding from the state.