IMF Executive Board Concludes 2026 Article IV Consultation with Finland
IMF News, January 19, 2026
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- Published: January 19, 2026
Overview
- The Executive Board completed the Article IV Consultation for Finland and the authorities consented to the publication of the Staff Report prepared for this consultation.
- Since the 2023 downturn, the economic recovery has been slow: consumption remained weak and construction investment fell; the fiscal position deteriorated significantly due to weak growth and expenditure increases.
- The economy is set to regain momentum in 2026, supported by private demand; real GDP is projected to grow by 1.5 percent in 2026 and 2027.
- Press Release No. 26/007; publication date indicated as January 19, 2026.
Economic outlook and risks
- Recovery drivers and projections:
- Real disposable income is projected to strengthen and underpin a gradual rebound in private consumption, supported by large household saving buffers.
- Private investment will strengthen as the construction sector slowly recovers and a pipeline of large-scale projects move forward.
- Real GDP is projected to grow by 1.5 percent in 2026 and 2027.
- Inflation is expected to remain close to 2 percent.
- Risks:
- Risks are tilted to the downside, primarily from trade tensions and geoeconomic uncertainty.
- Rapid AI adoption could reshape the job landscape and lead to faster- and larger-than-expected job displacement.
Executive Board assessment — growth and external position
- Growth has struggled to rebound since the 2023 downturn:
- Private consumption was unusually weak due to heightened uncertainty, falling house prices, and still-high interest rates, which more than offset a modest recovery in real wages.
- Private investment has been weak but recently showed tentative signs of improvement.
- From 2026, growth expected to strengthen as higher real disposable income supports consumption and investment momentum increases.
- Finland’s external position is assessed to be broadly in line with the level implied by medium-term fundamentals and desirable policies.
Fiscal outlook and policy recommendations
- Recent fiscal dynamics:
- The overall fiscal deficit increased to 4½ percent in 2024 and remained at a comparable level in 2025.
- The overall deficit is expected to remain above 3 percent in 2026 despite some improvement in the structural primary balance.
- The debt-to-GDP ratio will reach 95 percent by the end of the decade.
- Staff recommendation for consolidation:
- Consolidation by ½ percent of GDP per year, until the fiscal balance is closed and debt is on a declining path.
- Anchor consolidation on the new fiscal framework designed to secure political commitment to multi-year fiscal planning.
- Explore both revenue and expenditure measures, with a higher share from the latter.
- Revisit public spending priorities, especially for social protection, education, and health spending, and potentially the pension system, supported by regular expenditure reviews.
- Revenue mobilization should focus on indirect taxes.
Financial sector, stability, and macroprudential policy
- Banking sector health:
- Banks’ capital and profitability positions remain strong.
- Stress tests conclude systemic risks are contained; Finnish banks could withstand a severe economic slowdown amid elevated uncertainty and heightened geopolitical tensions.
- Banks’ heavy reliance on short-term wholesale funding continues to pose financial stability risks.
- Sectoral risks persist due to large real estate exposures, weak housing activity, and elevated commercial real estate risks.
- Recommended measures:
- Support for ongoing preparatory work to perform a joint Nordic-Baltic banking sector stress test in 2026.
- Enhance macroprudential buffers and do not relax borrower-based measures.
- Consider gradually phasing in a positive neutral counter-cyclical capital buffer.
- Enhance bank liquidity buffers to cover wholesale funding outflows over a five-day horizon and increase holdings of high-quality liquid assets.
- Add measures to the macroprudential toolkit and maintain a clear macroprudential mandate for the FIN-FSA with a well-defined financial stability objective.
Labor market, education, and integration
- Labor supply and policy changes:
- Unemployment continued to increase, largely driven by expanding labor supply.
- Rationalization of unemployment benefits, curtailed access to early retirement, and streamlined work-based immigration procedures have contributed to the increase in labor supply.
- Recommendations:
- Complement labor market reforms with measures to promote the integration of immigrants and facilitate their employment.
- Strengthen tertiary education; limit the scope for students to pursue more than one degree at the same level—except in fields with clear labor market needs—to free up capacity for first-time entrants.
- Upskilling and reskilling the labor force and adapting active policies to facilitate labor reallocation in response to technological change.
Innovation, digitalization, and AI
- Finland’s strengths and challenges:
- Indicators on innovation, digitalization and AI preparedness suggest Finland has a strong basis to create innovative startup firms and is well-prepared to reap the benefits of AI.
- Finnish firms face challenges in scaling up to compete internationally.
- Policy implications:
- Review domestic regulations and continue to advocate for further European integration to reduce internal barriers at the EU-level and help Finnish companies access larger markets.
- Prioritize upskilling/reskilling and active labor-market policies to manage potential job displacement from AI adoption.
Key statistics (selected)
- Growth and demand (percentage change, unless otherwise indicated):
- GDP: -0.9 (2023); 0.4 (2024); 0.2 (2025); 1.5 (2026); 1.3 (2027); 1.2 (2028); [table continues through 2031]
- Domestic demand: -4.2 (2023); -0.3 (2024); 1.7 (2025); 1.6 (2026); 1.4 (2027)
- Private consumption: 0.0 (2023); -0.4 (2024)
- Public consumption: 2.6 (2023); -2.5 (2024); -0.8 (2025); 0.9 (2026); 1.0 (2027)
- Gross fixed capital formation: -7.4 (2023); -5.0 (2024); 4.4 (2025); 4.1 (2026); 2.8 (2027)
- Net exports (contribution to growth in percent of GDP): 2.9 (2023); 1.1 (2024); -0.1 (2025); -0.2 (2026)
- Prices, costs, and income:
- Consumer price inflation (harmonized, average): 4.3 (2023); 1.8 (2024); 2.0 (2025)
- GDP deflator: 3.5 (2023); 0.7 (2024); 1.9 (2025); 2.2 (2026); 2.1 (2027); 2.4 (2028); 2.3 (2029)
- Unit labor cost, manufacturing: 6.7 (2023); -2.7 (2024)
- Labor market:
- Participation Rate (15-74 years): 68.6 (2023); 69.0 (2024); 69.4 (2025); 69.7 (2026); 70.2 (2027); 70.8 (2028); 71.2 (2029); 71.7 (2030); 72.2 (2031)
- Employment: 0.3 (2023); 0.5 (2024); 0.6 (2025)
- Unemployment rate (in percent): 7.2 (2023); 8.4 (2024); 9.0 (2025); 8.7 (2026); 8.6 (2027); 8.3 (2028); 8.2 (2029)
- Potential output and gap:
- Output gap (in percent of potential output): -1.4 (2023); -1.7 (2024); -1.0 (2025); -0.7 (2026); -0.5 (2027)
- Growth in potential output: 0.8
- General government finances (percent of GDP):
- Overall balance: -2.9 (2023); -4.5 (2024); -3.6 (2025); -3.5 (2026); -3.2 (2027); -3.3 (2028); -3.1 (2029)
- Primary balance: -3.0 (2023); -4.4 (2024); -4.1 (2025); -2.8 (2026); -2.4 (2027); -1.9 (2028); -1.8 (2029)
- Structural balance (in percent of potential GDP): -3.4 (2023); -3.7 (2024)
- Structural primary balance (in percent of potential GDP): -2.6 (2023); -2.3 (2024); -1.2 (2025)
- Gross debt: 77.1 (2023); 82.1 (2024); 88.3 (2025); 90.2 (2026); 90.7 (2027); 92.4 (2028); 94.0 (2029); 95.1 (2030); 96.2 (2031)
- Balance of payments:
- Current account balance: 0.1 (2023)
- Net international investment position: 12.9 (2023); 24.7 (2024); 24.8 (2025); 24.3 (2026); 23.6 (2027); 22.9 (2028); 22.1 (2029); 21.3 (2030); 20.7 (2031)
- Gross external debt: 216.9 (2023); 203.5 (2024); 211.2 (2025); 215.6 (2026); 218.5 (2027); 223.0 (2028); 226.5 (2029); 229.3 (2030); 231.4 (2031)
Source: IMF Executive Board press release — IMF Executive Board Concludes 2026 Article IV Consultation with Finland.