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Finland's economy will return to growth at the end of the year following a mild recession, the country's Ministry of Finance said in an economic survey.

However, the general government deficit will grow as rising prices begin to be reflected in general government expenditure, it added on Thursday.

Households have reduced their consumption as a result of rapid inflation and rising interest rates. Finland's economy has been in a mild recession since last autumn. This year, the country's GDP is expected to contract by 0.2 per cent, but purchasing power will begin to rise as inflation slows and salaries and wages increase during 2023.

The country's economy is expected to grow 1.3 per cent in 2024 and 1.6 per cent in 2025, Xinhua news agency reported.

"The economic outlook in Europe has improved as fears of an energy crisis have subsided. In Finland, the recession will be mild and short," the Ministry's Director General Mikko Spolander said.

"The economy will begin to grow again over the course of the year. Unfortunately, there will be no corresponding relief in general government finances."

Expectations for global economic growth have improved as energy prices have fallen and China has succeeded in lifting restrictions imposed due to Covid-19, Spolander added.

According to the Ministry, this year, Finland's economic growth will be slower than the average in the eurozone because of the lesser availability of energy support in Finland and the faster impact of rising interest rates on households in Finland than in other countries.

The general government deficit decreased last year to the level preceding the Covid-19 pandemic as a result of rapid growth, high employment and the end of measures taken to combat the Covid-19 pandemic.

This year, the deficit will begin to grow again, driven by the general economic situation, index adjustments, higher general interest rates and increasing spending on preparedness, the Ministry said.

The general government deficit will be 2.6 per cent of GDP this year and next year before temporarily exceeding 3 per cent in 2025. The deficit is expected to drop to slightly below 3 per cent from 2026.