Finnish central bank sees economy shrinking this year

Finland's central bank said Tuesday the Nordic country's economy will contract by 0.8 percent this year, fuelling fears that the staunch austerity advocate is becoming increasingly affected by the eurozone's economic crisis.

In December, the Bank of Finland forecast 0.4 percent growth in 2013, down from a 1.2 percent projection in July last year.

"Private consumption will no longer support growth to the same extent as before, with consumer purchasing power and employment both declining," the bank said in a statement.

According to bank governor Erkki Liikanen, the Finnish economy "has faced two major changes at the same time: the restructuring of Finnish industry and the recession in the wake of the financial crisis."

The new forecast predicts public debt will rise to 62 percent of gross domestic product (GDP) by 2015, which would put the country in breach of the Maastricht Treaty's limit of 60 percent.

Finland prides itself on being the only country in the eurozone to have respected the rules of the single European currency's framework since signing the Maastricht Treaty in 1994.

The export-reliant nation has posted a trade deficit since early 2011, as key sectors such as technology, paper companies and steel and metal producers were hard hit by the crisis.

In the first quarter, GDP fell by 0.1 percent, narrowing from a 0.7 percent decline in the fourth quarter last year.

The Finnish government said in December it believed the economy would grow by 0.5 percent this year.