A team from the International Monetary Fund (IMF), led by Alex Pienkowski, conducted discussions in Finland from October 29 to November 8 for the 2025 Article IV Consultation. The mission involved meetings with Governor Olli Rehn, Permanent Secretary Juha Majanen, and other senior officials, along with representatives from various sectors.
The Finnish economy is beginning to recover following a challenging period in 2023. Modest growth is expected in 2025 and beyond, although risks remain primarily on the downside. To support growth and resilience, policy efforts should focus on several areas.
Economic recovery has begun but remains sluggish. After a GDP decline of 1.2 percent in 2023, slight positive growth was recorded in early 2024 due to falling inflation and wage growth stabilizing private consumption. However, annual growth is projected at -0.3 percent for this year as private investment continues to decline. Employment has been robust since the pandemic due to factors such as weak real wages and increased public employment.
Inflation has decreased to below two percent, driven by lower energy prices and moderate core inflation resulting from weak domestic demand. Real wages are growing modestly while corporate profits have moderated further inflationary pressures.
The fiscal deficit widened to three percent of GDP in 2023 due to increased expenditures related to defense and immigration needs among other factors. Public debt rose to 77 percent of GDP last year and is expected to continue increasing despite new fiscal consolidation measures announced earlier this year.
Finland's economic outlook faces external risks such as geopolitical tensions or financial market shocks while domestic risks appear more balanced with potential upsides including investments related to green transitions or ICT sector expansion.
New fiscal measures introduced aim at reducing deficits including VAT rate increases alongside cost savings within government operations which will mostly take effect next year helping initiate necessary adjustments towards balancing budgets by end-decade according authorities' plans requiring both expenditure control alongside revenue enhancements protecting productivity-enhancing spending priorities like education support structures reforms needed boosting participation rates addressing skill mismatches particularly among younger populations aspiring higher education attainment targets set forth over coming years amid challenges posed declining average working hours partly attributed cyclical shifts aging society dynamics necessitating ongoing attention potential failures markets policies warranting corrective actions ensure sustained long-term prosperity nationwide leveraging strong foundations innovation-driven economy well-positioned compete globally albeit requiring continued structural improvements foster entrepreneurship high-growth ventures increase overall productivity levels across diverse sectors
Despite resilience shown banking system vulnerabilities persist large interconnected institutions reliant short-term funding exposed elevated household indebtedness heightened cyber threats although proactive countermeasures maintained stability encouraging cross-border cooperation stress testing initiatives enhance oversight capabilities regionally recommended additional safeguards implemented bolster liquidity positions address specific risk areas identified through comprehensive assessment programs undertaken collaboratively relevant stakeholders
The IMF expressed gratitude towards Finnish authorities private sector partners their constructive engagement throughout consultation process contributing valuable insights facilitating productive dialogue shared objectives fostering sustainable inclusive economic development moving forward collectively