An International Monetary Fund report predicts accelerated growth for the Finnish economy next year and into 2027, adding that there are still plenty of risks ahead.
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Finland’s economic recovery has been slow, but the IMF predicts it to accelerate next year. Image: Henrietta Hassinen / Yle
The International Monetary Fund (IMF) has published its annual assessment of the Finnish economy, with plenty of words of caution amid the projections of growth and recovery.
“The Finnish economy continues to underperform amid slow productivity growth and persistently weak private demand. While a stronger recovery is expected beginning next year, downside risks remain,” the report states.
The IMF predicts that the Finnish economy will grow by 1.5 percent next year and by the same amount in 2027, offering a more optimistic outlook than their domestic forecaster counterparts.
In its assessment, the IMF notes that growth will be “supported by a gradual recovery in domestic private demand as real wages rise, the housing market starts to recover, and several large investment projects begin”.
“Also, the building of more data centers and icebreaker deals should provide a boost for Finland’s economy and growth,” Alex Pienkowski, head of the IMF’s Finland team, noted.
But there are plenty of risks too, he added.
“The risks are external, things the government cannot control in any way. For example, tariffs or geopolitical tensions can do a lot of harm to Finland’s economy if they occur,” he said.
Fast debt and slow productivity
Although the IMF’s overall outlook for the Finnish economy appears promising, there were words of warning about two factors in particular: its spiralling state debt and sluggish productivity.
In terms of state debt, the report notes that the level has remained stubbornly high.
“The overall fiscal deficit is projected to remain above three percent, while the debt will approach 95 percent of GDP by the end of the decade,” the IMF predicts, adding that failing to get the figure under control “could erode market confidence over debt sustainability”.
However, the report praised a recent cross-party agreement on applying a ‘debt brake’ that will extend across governmental terms of office.
“If successful, the new rules will help to anchor fiscal policy, build policy space, and reduce risks to market confidence,” the IMF said.
On the subject of weak productivity, the report noted that Finland has a strong foundation to create innovative start-up firms, but they are too often constrained by bureaucratic red tape.
“These businesses often face barriers to scale-up, which reduces economic dynamism, limits their ability to compete internationally, and constrains productivity growth of the economy,” it wrote.