Finland\u2019s main economic forecasting institutions have repeatedly missed actual GDP growth by wide margins, according to a new study by the Kalevi Sorsa Foundation, which argues that fiscal policy should rely less heavily on forecasts and more on confirmed economic data.<\/p>\n
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The report examined forecasts from the Ministry of Finance, Bank of Finland, Etla, Pellervo Economic Research, Labore, Nordea and OP Pohjola. It found that their spring forecasts for the following year\u2019s economic growth differed from the eventual outcome by an average of 1.5 percentage points between 2016 and 2025.<\/p>\n
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That error exceeded Finland\u2019s average annual economic growth of about 1.0 per cent over the same period.<\/p>\n
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The study also found little difference in forecasting accuracy between the institutions. Their estimates tended to move in the same direction and often missed turning points in the economy.<\/p>\n
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\u201cAll had roughly the same average error and tended to make mistakes in the same direction,\u201d Lauri Fin\u00e9r, executive director of the Kalevi Sorsa Foundation and one of the report\u2019s authors, said at a media briefing reported by Helsingin Sanomat.<\/p>\n
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The report examined forecasts over the period from 2011 to 2025 and combined statistical comparisons with interviews conducted at Finland\u2019s main forecasting institutions and Statistics Finland.<\/p>\n
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One source of error identified by the researchers was the use of preliminary national accounts data.<\/p>\n
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According to the report, the first estimate of GDP growth published by Statistics Finland differed from the final confirmed figure by an average of 0.7 percentage points between 2011 and 2025.<\/p>\n
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Average GDP growth during the same period was also 0.7 per cent.<\/p>\n
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The study\u2019s authors argue that institutions are therefore often trying to predict future economic development without having an accurate picture of the economy at the starting point.<\/p>\n
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\u201cForecasts are based on unconfirmed statistics that almost always turn out to be substantially wrong,\u201d Jussi Syst\u00e4, an economic policy specialist at the foundation and co-author of the study, said in the foundation\u2019s release.<\/p>\n
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The report cites the latest revisions to GDP figures for 2024 and 2025 as examples. Preliminary data had suggested that the Finnish economy contracted in 2024, while later figures showed growth of close to one per cent.<\/p>\n
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The researchers also examined the methods used by forecasting bodies.<\/p>\n
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Institutions generally begin by reviewing earlier forecasts and adjusting assumptions according to changes in the international economy and economic policy. Separate forecasts are then produced for different parts of the economy before being combined into a broader model.<\/p>\n
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The report says forecasters themselves recognise the uncertainty in their estimates. It also argues that assumptions about the economy returning towards its historical average growth rate tend to produce estimates that are too optimistic.<\/p>\n
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The Ministry of Finance was examined over a longer period because its forecasts play a central role in government budgeting.<\/p>\n
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According to the study, the ministry\u2019s spring forecasts made one year in advance projected average growth of 1.7 per cent between 2011 and 2025. Actual average growth was 0.7 per cent.<\/p>\n
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Fin\u00e9r said the ministry had therefore predicted growth at more than twice the realised rate on average over the period.<\/p>\n
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The researchers also reviewed Ministry of Finance forecasts for the public deficit.<\/p>\n
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Two-year forecasts for the deficit as a share of GDP differed from the eventual result by an average of 2.2 percentage points between 2011 and 2025, according to the study.<\/p>\n
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Converted into money at the projected size of Finland\u2019s economy in 2031, an error of that scale would correspond to about \u20ac7.5 billion, the foundation said.<\/p>\n
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The findings matter because forecasts are built into several areas of Finnish economic policy.<\/p>\n
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Government budgets and programmes use Ministry of Finance forecasts as a basis for spending and revenue assumptions. Forecasts also affect research and development funding and annual inflation adjustments to income taxation.<\/p>\n
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The report notes that their role is set to increase under Finland\u2019s new fiscal framework and planned debt brake.<\/p>\n
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A preliminary parliamentary agreement reached in February 2026 for \u20ac8 billion to \u20ac11 billion in public-finance adjustment measures was calculated using the Ministry of Finance\u2019s forecast.<\/p>\n
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The authors argue that such decisions should not be tied too closely to estimates that have a history of large revisions.<\/p>\n
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\u201cForecasts are necessary because policy has to rely on some assessment of future economic development,\u201d Syst\u00e4 said. \u201cThe problem arises if their uncertainty is not taken into account in decision-making.\u201d<\/p>\n
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The report recommends making greater use of economic indicators that become available sooner and are less dependent on model assumptions.<\/p>\n
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These include real-time tax data and employment statistics, which the authors say might provide a more reliable picture of the current business cycle.<\/p>\n
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