## IMF Executive Board Concludes 2025 Article IV Consultation with Finland

_IMF News, January 21, 2025_

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## Bibliographic details
- Published: January 21, 2025

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### Overview
- On January 15, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Finland.
- The Finnish economy is recovering from the 2023 recession, supported by easing inflation and real wage growth.
- Rebound is hindered by stagnant construction investment and weak external demand.
- Employment remains robust, driven by lower real wages, increased immigration, higher public employment, and increased participation rates.
- Inflation has temporarily fallen below 2 percent, reflecting declining energy prices and subdued domestic demand.

### Economic outlook and projections
- The economy is projected to have contracted by 0.3 percent in 2024 before rebounding to around 1½ percent in 2025, as private investment and consumption recover alongside easing interest rates and stabilizing house prices.
- External demand will pick up somewhat but will be offset by stronger imports.
- Inflation is expected to stabilize around 2 percent in 2025, supported by the recent VAT hike and recovering domestic demand.
- Risks are tilted to the downside, including intensification of regional conflicts and geopolitical fragmentation.
- Structural challenges weigh on the medium-term outlook, notably adverse demographics and low productivity growth.

### Executive Board assessment — major messages
- Directors welcomed Finland’s strengthening growth momentum following the 2023 recession and the decline in inflation.
- Directors noted longstanding structural challenges, including low productivity growth and an aging population, with risks tilted to the downside, particularly on the external front.
- To strengthen resilience, Directors highlighted the need to ensure fiscal sustainability and financial stability while implementing structural reforms to boost potential growth.

### Fiscal policy and public finances
- Directors commended the authorities’ ongoing fiscal efforts but emphasized the need for additional consolidation to reverse public debt dynamics amid pressures from defense and aging‑related spending.
- The adjustment should involve both spending and revenue measures, while protecting productivity‑enhancing spending, including public investments, education, and R&D.

Key fiscal figures (percent of GDP unless otherwise indicated)
- Overall balance: -2.8 (2021), -3.0 (2022), -3.7 (2023), -3.2 (2024), -2.6 (2025), -2.3 (2026), -2.1 (2027)
- Primary balance: -2.9 (2021), -3.9 (2022), -2.0 (2023), -1.4 (2024)
- Structural balance (in percent of potential GDP): -2.4 (2021), -2.30 (2022), -2.5 (2023)
- Structural primary balance (in percent of potential GDP): -3.3 (2021)
- Gross debt: 73.1 (2021), 73.9 (2022), 77.0 (2023), 81.6 (2024), 84.2 (2025), 85.3 (2026), 85.9 (2027), 86.6 (2028), 87.4 (2029), 88.2 (2030)

### Financial sector assessment and recommendations
- Directors were encouraged by banking system resilience but noted remaining pockets of vulnerability:
  - High reliance on wholesale funding
  - Household indebtedness
  - Cross‑border risks
- Directors welcomed the reinstatement of the systemic risk buffer and recommended further strengthening of the macroprudential toolkit.
- Directors commended Finland’s initiative in conducting joint Nordic and Baltic‑wide banking sector stress tests, and urged continued monitoring of financial stability risks related to non‑bank financial institutions.
- Directors encouraged further strengthening the AML/CFT framework.

### Structural reforms and growth-enhancing measures
- Directors agreed structural reforms are essential to enhance Finland’s potential growth.
- They welcomed recent labor market reforms and encouraged further efforts to:
  - Increase labor force participation rates
  - Reduce skill mismatches
  - Address the steep decline in average hours worked since the pandemic
- Additional measures to improve productivity could include:
  - Easing access to risk capital
  - Reviewing barriers to entry into the services sector
  - Promoting the deepening of the European Single Market
- Directors considered strengthening the role of carbon sinks through additional policy measures, including taxes, important to help meet Finland’s national climate mitigation targets.

### Selected economic indicators, 2021–30 (key series)
Output and demand (percentage change, unless otherwise indicated)
- GDP: 2.7 (2021), 1.5 (2022), -1.2 (2023), -0.3 (2024), 1.4 (2025), 1.3 (2026), 1.2 (2027)
- Domestic demand: 3.0 (2021), -4.2 (2022), -0.8 (2023), 1.9 (2024), 1.8 (2025), 1.6 (2026)
- Private consumption: 3.2 (2021), 0.3 (2022), -0.4 (2023), 1.0 (2024), 1.1 (2025)
- Public consumption: 3.9 (2021), -1.0 (2022), 3.4 (2023), 0.5 (2024), 0.6 (2025), 0.9 (2026)
- Gross fixed capital formation: 1.7 (2021), 2.6 (2022), -9.0 (2023), -6.6 (2024), 4.2 (2025), 3.8 (2026), 3.5 (2027)
- Net exports (contribution to growth in percent of GDP): -0.1 (2021), -1.7 (2022), 3.1 (2023), -0.2 (2024), 0.0 (2025)

Prices, costs, and income
- Consumer price inflation (harmonized, average): 2.1 (2021), 7.2 (2022), 4.3 (2023), 2.0 (2024)
- Consumer price inflation (harmonized, end-year): 8.8 (2021) [note: table shows only this single end-year value]

Labor market
- Participation Rate (15-74 years): 67.0 (2021), 68.0 (2022), 68.6 (2023), 68.9 (2024), 69.3 (2025), 69.6 (2026), 70.1 (2027), 70.5 (2028), 70.9 (2029), 71.4 (2030)
- Employment: 2.4 (2021), -1.1 (2022), 0.4 (2023), [no further annual entries displayed]
- Unemployment rate (in percent): 7.6 (2021), 6.8 (2022), 8.3 (2023), 8.1 (2024), 7.9 (2025), 7.8 (2026), 7.4 (2027), 7.3 (2028)

Potential output
- Output gap (in percent of potential output): -0.9 (2021), -2.2 (2022), -1.5 (2023), -0.5 (2024)
- Growth in potential output: 0.8 (2021)

National saving and investment
- Gross national saving: 25.1 (2021), 25.3 (2022), 22.4 (2023), 21.3 (2024), 21.9 (2025), 22.5 (2026), 22.9 (2027), 23.3 (2028), 23.5 (2029), 23.7 (2030)
- Gross domestic investment: 24.8 (2021), 27.5 (2022), 22.8 (2023), 21.5 (2024), 22.3 (2025), 23.6 (2026), 23.8 (2027), 23.9 (2028)

Balance of payments and external sector
- Goods and services balance: 0.1 (2021), -1.9 (2022), 0.2 (2023)
- Net international investment position: 2.3 (2021), 12.6 (2022), 12.0 (2023), 11.2 (2024), 10.4 (2025), 9.5 (2026)
- Gross external debt: 209.6 (2021), 215.7 (2022), 215.3 (2023), 214.8 (2024), 211.7 (2025), 209.2 (2026), 206.6 (2027), 204.5 (2028), 202.4 (2029), 200.3 (2030)

- Sources cited in the original release: Bank of Finland; BIS; International Financial Statistics; IMF Institute; Ministry of Finance; Statistics Finland; and IMF staff calculations.

*IMF Executive Board press release, January 21, 2025.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Finland and the IMF](http://www.imf.org/external/country/FIN/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/01/17/pr25005-finland-imf-executive-board-concludes-2025-article-iv-consultation_