Finland's central bank on Thursday slashed the growth forecasts for the economy citing possible stagnation in private consumption and weak investment.

The Bank of Finland now expects the economy to grow 0.3 percent this year, weaker than 1.5 percent expansion projected in June. The outlook for 2013 was cut to 0.4 percent from 1.2 percent.

In 2014, the GDP is tipped to rise 1.5 percent, at a slightly weaker pace than the 1.6 percent increase projected earlier.

In the latest economic bulletin released today, the bank said household purchasing power will contract in 2013 and growth in private consumption will come to a halt.

Consumption will begin to grow again only in 2014, when economic growth and decelerating inflation support development of real incomes, the bank noted. According to the forecast report, investment will contract in 2012 and remain at the same level through 2013.

The central bank expects Finnish exports to be lower in 2012 and begin to grow slowly in 2013. However, their share of world trade will continue to decline in 2013-2014.

In these years, imports will grow slightly more slowly than exports, due to the sluggishness of domestic demand, the report said.

Though an increase in value-added tax will push inflation up to 2.4 percent in 2013, a number of factors such as muted economic growth, fall in prices of energy commodities and slowdown in wage inflation will bring down headline inflation to just 1.6 percent in 2014.

RTTNews