Finland's gross domestic product (GDP) is expected to fall by more than two percent this year, according to a statement posted on the website of the Ministry of Finance on Friday.

Finland's GDP growth slowed sharply toward the end of 2008. The higher cost of finance and the subdued state of the housing market led to a slackening in construction output, the statement said.

In addition, the export markets declined rapidly, and the fall in exports was followed by drops in industrial output.

The statement said the decline in construction, other investment activities and exports will lead to higher unemployment. Households have therefore become more cautious in spending.

The present caution shows that the increased purchasing power brought about by sharply rising earnings coupled with lower inflation and cuts in income tax has not been fully reflected in consumption, it said.

As a small country dependent on exports, the recovery of the Finnish economy is "intimately connected with the cyclical state of the international economy," the statement said.

If the world economy begins to recover during the second half of this year, as is generally expected, the downturn in the Finnish economy will probably bottom out before the end of the year.

(Xinhua News Agency January 24, 2009)