Saturday, April 13, 2024



Finland Flag

GDP: USD280.8bn (World ranking 48)
Population: 5.6mn (World ranking 116)
Form of state: Parliamentary republic
Head of government: Petteri Orpo (PM)
Next elections: 2027, Legislative


  • Attractive business environment with high research and development spending
  • Low fiscal deficit and contained public debt
  • Improving competitiveness, a highly skilled workforce and a robust welfare state


  • Exposure to Russia is still high
  • Rapidly deteriorating current account balance with high private debt, notably linked to housing loans
  • High labor costs and weak demographics

Economic overview

Muted growth to resume in 2024

Finland has experienced rather low growth in the past, with +1.2% on average over the last 20 years and just +0.6% for the past decade. GDP declined by -2.9% in 2020, much less than the EU average. Government consumption and exports have primarily been responsible for the rebound. The country benefits from a dynamic manufacturing sector that enables it to support its current account surplus. Consumer spending benefited from the release of excess savings after Covid-19, which helped growth to be strong at +3.0% in 2021 and +2.1% in 2022. The unemployment rate fell from 7.6% in 2021 to 6.8% in 2022, but the labor market situation will deteriorate in 2023 and 2024. The unemployment rate will rise to 7.8% in 2024, which is above the level of structural unemployment.

High inflation and policy tightening are weighing on domestic demand and the slowing of the global economy leads us to expect a GDP decline of -0.4% in 2023. The economy will strengthen gradually, but output growth will remain moderate, at +1.0% in 2024 and +2.2% in 2025. Inflation reached 7.1% in 2022, with energy and food prices being the main drivers. After reaching its peak in the last quarter of 2022, inflation has decelerated to 6.2% in 2023, followed by a decline to 2.4% in 2024 and a further decrease to 2.2% in 2025. Tighter credit constraints also weigh on housing prices, even though the real estate market seems fairly valued in Finland.

Fiscal leeway to tackle economic uncertainty

Finland has a history of moderate fiscal deficits, hovering around -3% of GDP in the past decade. The fiscal deficit went from -1% in 2019 to -5.9% in 2020 but decreased again to -2.8% in 2021 and -0.9% in 2022 on the back of increased revenue performance due to higher-than-expected inflation, increased accrual of social security contributions and the gradual removal of pandemic-related measures. The general government deficit is expected to widen to -3.2% of GDP in 2024, driven by a revenue decrease due to changes in socialsecurity contributions. Additionally, the deficit is projected to be influenced by additional defense spending, costs from R&D-related measures and investment funding over the forecast horizon. These factors will persist in 2025, leading to a further increase in the deficit to -3.4%. In 2022, the debt- to-GDP ratio stood at 73.0%, pointing to the resumption of a growing trend. The general government debt-to-GDP ratio will increase in the next years, reaching 76.2% in 2024 and 78% in 2025, due to a higher primary deficit. On the monetary front, as a Eurozone member, the country relies on decisions taken by the European Central Bank.

An attractive business environment

The main areas of improvement are access to credit and the protection of minority investors. However, the country tops the list when it comes to resolving insolvencies. Moreover, it is worth mentioning Finland’s inclination towards innovation, as seen in the advancement of its digital infrastructure, a characteristic common to Nordic countries.

Like in other Nordic countries, the Finnish political system is regarded as a model of transparency and efficiency. The country is ruled by the liberal-conservative National Coalition in a right-wing coalition with the Finns Party, the Swedish People’s Party and the Christian Democrats. Political opposition is more often constructive than seen elsewhere.

CEOWORLD magazine - Insights - Finland