After a contraction in 2023 and limited growth in 2024, Finland’s economy is expected to almost stagnate in 2025. Economic activity is forecast to resume expansion in 2026 and 2027, growing by approximately 1.0% in both years. The unemployment rate is forecast at 9.5% in 2025, declining only slightly to 9.0% by 2027. Headline inflation is projected to slow down from 1.9% in 2025 to 1.6% in 2026 before reaching 2.0% in 2027. The accelerating economic activity and some fiscal consolidation measures are projected to reduce the general government deficit from 4.5% in 2025 to 3.9% by 2027. The public debt-to-GDP ratio is set to increase from 82.5% in 2024 to 92.3% in 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 0.1 | 0.9 | 1.2 |
| Inflation (%, yoy) | 1.9 | 1.6 | 2.0 |
| Unemployment (%) | 9.5 | 9.3 | 9.0 |
| General government balance (% of GDP) | -4.5 | -4.0 | -3.9 |
| Gross public debt (% of GDP) | 88.1 | 90.9 | 92.3 |
| Current account balance (% of GDP) | -0.9 | -1.5 | -1.9 |
The economy is expected to expand again
After declining by 0.9% in 2023, real GDP rebounded by 0.4% in 2024. This recovery was driven by exports, but investments dragged on growth. In 2025, the expansion of economic activity is expected to come to a halt, with real GDP projected to grow only by 0.1%. Looking ahead, real GDP is expected to increase to 0.9% in 2026 and 1.2% in 2027, thanks to stronger domestic demand.
Investment started to increase in 2025, led by machinery and equipment investments, including public sector investment in defence. After a significant reduction in recent years, residential investment is forecast to expand again in 2026.
Domestic demand, excluding changes in inventories, is expected to decline in 2025, due to a decline in private consumption. During the first half of 2025, consumption fell significantly, and the household saving rate increased. Consumer confidence is low due to high unemployment and concerns about the broader economic outlook and the challenging geopolitical context. Falling house prices may have impacted perceived household wealth. In 2026-27, consumption is projected to rise again as household purchasing power improves, supported by recent wage agreements for 2025-27 and higher employment. As consumption and investment rise, domestic demand is set to become the main driver of economic growth in 2026 and 2027.
Despite global trade uncertainty and a stronger euro, manufacturing orders have increased, and cost-competitiveness remains strong. Exports are projected to expand over the forecast horizon. Imports are set to grow slowly in 2025 due to weak domestic demand, but to accelerate in 2026 and 2027. Overall, while net exports are expected to support economic growth in 2025, they are set to negatively impact growth in the outer forecast years.
Rise in unemployment coming to a halt
The unemployment rate increased from 8.4% in 2024 to 9.8% in September 2025, influenced by lower demand for labour due to weak economic activity, and higher labour force participation. As the economy starts to recover, employment is expected to increase gradually, by 0.4% in 2026 and by 0.6% in 2027, after a decline of 0.7% in 2025. Unemployment is expected to average 9.5% in 2025, before decreasing to 9.3% in 2026 and 9.0% in 2027. The significant wage increases agreed for 2025-27, totalling approximately 8%, will support growth in real disposable income.
Price pressures receding
In 2025, consumer inflation accelerated from 1.7% in January to 2.2% in September. While food and services prices pushed inflation higher, energy became cheaper in the course of the year. However, in October, inflation declined to 1.5%, as the standard VAT rate increase to 25.5% from September 2024 stopped impacting the inflation measurements. Overall, annual average inflation is projected at 1.9% in 2025. Price pressures are expected to moderate afterwards, and the inflation rate is projected at 1.6% in 2026. In 2027, inflation reaches 2.0%.
Public finances remain under pressure
In 2025, the general government deficit is expected to remain steady, at 4.5% of GDP. Revenue increases are mainly driven by the higher VAT rate enacted in late 2024. However, the decline in household consumption limits receipts from taxes on production and imports, while income tax revenue is slowed down due to declining employment. Public expenditure is projected to increase due to employee compensation sustained by recent wage negotiations and public investment, especially in defence. Meanwhile, cuts to social benefits and the freeze of the indexation of certain social transfers (e.g. basic unemployment allowance) adopted in 2023 are expected to contain expenditure growth in 2025. As a result of these developments, the fiscal stance is expected to remain broadly neutral in 2025.
In 2026, the anticipated economic recovery is projected to boost revenues along with the planned increase in social contributions, though this will be partially offset by the implementation of tax cuts decided in April 2025. The measures included in the budget for 2026 are expected to contribute to the reduction of the deficit, which is set to reach 4.0% of GDP. The fiscal stance is projected to become contractionary, in part due to the increase in social contributions. In 2027, while economic growth is set to help improve the deficit, a corporate income tax cut and increases in defence expenditure are forecast to maintain the deficit at 3.9% of GDP. The fiscal stance is expected to be broadly neutral.
The debt-to-GDP ratio reached 82.5% in 2024 and is forecast to increase to 88.1% in 2025, 90.9% in 2026, and 92.3% in 2027 due to persistent large deficits and tepid GDP growth.