Finland: Staff Concluding Statement of the 2026 Article IV Mission

IMF News, November 10, 2025

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Canonical URL: Finland: Staff Concluding Statement of the 2026 Article IV Mission

IMF team led by Mr. Alex Pienkowski conducted the 2026 Article IV Consultation mission in Helsinki and Tampere during October 28-November 7.
Meetings included Minister of Finance Riikka Purra, Governor Olli Rehn, other senior officials, and representatives from the private sector, banks, labor unions, and other stakeholders.
Publication date: November 10, 2025.

The Finnish economy continues to underperform amid slow productivity growth and persistently weak private demand.
Real GDP growth history and projections:
- Contraction in 2023.
- Real GDP grew by 0.4 percent in 2024 but slowed again in 2025.
- Activity in 2025 is expected to remain subdued, with annual growth projected at ¼ percent.
- Output is projected to increase by 1½ percent in both 2026 and 2027.
Inflation:
- Inflation has remained contained at around 2 percent.
- Headline inflation moderated with falling energy prices offsetting stronger core inflation.
- Headline inflation is expected to remain at 2 percent in the medium term.
Drivers and headwinds:
- Private consumption dampened by heightened uncertainty, falling house prices, and the increase in interest rates since 2022.
- Private investment, including in construction, fell significantly.
- Net exports supported growth despite higher tariffs.
- Recovery support expected from rising real wages, housing market recovery, and several large investment projects beginning.

Fiscal deterioration:
- The fiscal deficit widened by 1.5 percent of GDP, reaching 4.5 percent in 2024.
- Despite consolidation efforts, weak revenue growth, higher defense spending, and pressure from health and social services are likely to keep the 2025 deficit broadly unchanged.
- Public debt—already exceeding levels observed in Nordic peers—is expected to approach 90 percent of GDP in 2025.
Medium-term fiscal trajectory:
- Some welcome fiscal adjustment is expected in 2026 as previous consolidation and the anticipated economic rebound take effect.
- The overall fiscal deficit is projected to remain above 3 percent, while debt will approach 95 percent of GDP by the end of the decade.
- Larger spending needs and higher long-term interest rates pose risks to public debt and market confidence.
Consolidation recommendation:
- Authorities should seek to consolidate by ½ percent of GDP (€1.5 billion) annually, until the fiscal balance is closed and debt begins to decline.
- Consolidation measures must be well-targeted and efficient, addressing both revenue and expenditure.
- The new national fiscal framework and the Parliamentary Pact for Fiscal Policy provide a cross-party commitment to steady debt reduction over many parliamentary cycles.

Labor market and policy context:
- Recent labor market reforms and increased immigration have supported an increase in labor supply.
- The government is streamlining the unemployment benefit system and easing labor market regulations to strengthen work incentives.
- Tertiary education attainment has stagnated at levels below peer countries.
Policy priorities to bolster productivity:
- Increase tertiary education attainment and upskill the labor force.
- Adapt active labor market policies to facilitate AI adoption.
- Reduce barriers to firm growth and scale-up by reviewing domestic red tape and improving access to funding and investment.
- Advocate for reduced barriers to trade within the EU and further European integration, including compromise on energy issues.

Systemic assessment:
- The banking system remains resilient with strong capital positions and profitability.
- Stress tests indicate banks could withstand a severe economic slowdown.
- Vulnerabilities persist from weaker real estate and construction market activity, elevated household debt, and significant cross-country interconnectedness.
- Cyber threats have risen, though their impact on financial stability has so far remained contained.
Macroprudential recommendations:
- Support preparatory work for a joint Nordic-Baltic banking sector stress test in 2026.
- Maintain the systemic risk buffer on credit institutions at 1 percent given structural vulnerabilities.
- Gradually phase in a positive neutral rate for the Counter-Cyclical Capital Buffer.
- Maintain existing borrower-based measures—particularly loan-to-value limits and loan maturity limits—at current levels.
- Incorporate debt-to-income and debt-service to income limits into the policy toolkit.
- Maintain a clear macroprudential framework with a well-defined objective to safeguard financial stability.

Downside risks are predominant:
- External risks: escalating trade tensions and geoeconomic uncertainty.
- Domestic risks: slower-than-expected labor market recovery, sharper declines in house prices, further labor productivity weakness.
- Fiscal risks: larger spending needs and higher long-term interest rates that could undermine debt sustainability and market confidence.

Commit to credible consolidation efforts to lower debt over the medium term.
Enhance productivity by strengthening tertiary education, supporting AI adoption, and reducing trade barriers within the European Union.
Strengthen financial sector resilience by expanding the macro-prudential toolkit, while maintaining existing borrower-based measures.

Finland: Staff Concluding Statement of the 2026 Article IV Mission (IMF), November 10, 2025.