Turnover in the domestic retail sector will shrink by around 2.5 percent this year and by even more in 2023, according to a Finnish Commerce Federation forecast.

The commerce lobby group said that if Finland and the rest of Europe drift into recession, there will be even further reductions in trade.

According to the group's preliminary figures, retail sales decreased by around 2.6 percent during the first half of the year and net sales in terms of euros grew by 3.9 percent.

However, there are both positive and negative aspects to the group's forecast, according to its chief economist, Jaana Kurjenoja.

Kurenoja listed several factors that could cause retail trade to plummet even further. These include the possibility of economic growth in Europe coming to a standstill, a further weakening of the euro, continued Covid-related lockdowns in China and the impact of the war in Ukraine on energy prices.

"[Such situations] would also cut trade employment," she said in a statement issued on Wednesday.

Not all gloom

Nevertheless, the economist pointed out that more optimistic outcomes remain possible.

"The rise in interest rates could remain more subdued than expected, the price rises of raw materials has already slowed down and energy availability may be better than our worst fears," Kurjenoja said.

The commerce lobby group suggested that one of the biggest structural problems facing Finland was weak purchasing power compared to the cost of labour, recommending that the country reduce income taxes.

The group also proposed that the pharmacy sector should be reformed "to meet the needs of customers and not individual pharmacists."

The organisation's CEO, Mari Kiviniemi, also said the dismantling of the state alcohol monopoly Alko should continue.

"The previous alcohol reform showed that increasing competition benefits the consumer and does not pose a threat of collapse for society and public health," Kiviniemi said.

Kiviniemi is a former Centre Party politician who served as Finland' second female Prime Minister from 2010 to 2011.