End of the economic slide

Finland has faced a period of modest growth over the past decade, averaging just +0.9%. However, the economy saw a rebound in 2021 with a growth rate of +3.0%, followed by +2.1% in 2022, largely driven by consumer spending fueled by the release of excess savings accumulated during the Covid-19 pandemic. In 2023, Finland slipped into recession, recording a decline of -1.2%. This economic weakness was widespread, influenced by factors such as inflation eroding purchasing power, tighter financing conditions and lackluster performance in export markets. Yet, 2024 brought some encouraging signs even though growth is still fairly subdued. A decrease in inflation and interest rates has bolstered consumer confidence, although it remains relatively fragile, leading to still stagnant private consumption. The construction sector continues to struggle; however, lower interest rates have gradually revitalized housing sales, and the decline in house prices seems to have stabilized. While the labor market has been on a downward trend, there are expectations for improvement in 2025 as economic growth begins to pick up. Overall, the outlook for Finland's economy is becoming more optimistic as international trade is expected to strengthen in the coming years. However, rising geopolitical tensions pose a potential threat to this positive forecast. Growth is anticipated to accelerate to +1.3% in 2025 and +1.5% in 2026, driven by increased consumer spending and revived investment spending.

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 decelerated to +6.3% in 2023. There has been a broad-based drop and inflation has been the lowest in the Eurozone in 2024. Annual inflation in goods and food fell to nearly zero and only services prices increased in 2024. The price of electricity has fallen throughout. Since inflationary pressures are low, inflation is expected to remain around +2% in the coming years, despite the price increase resulting from the VAT hike.

Finland's political stability, low corruption levels and transparent legal system contribute to a secure business environment that fosters growth and development. Its strong inclination towards innovation is evident in its advanced digital infrastructure, which reflects the country's commitment to progress. As a global leader in green technology and data-driven solutions, Finland leverages its expertise and innovative approach to excel in these fields, positioning itself at the forefront of sustainable advancements.

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 under Prime Minister Petteri Orpo since 2023. Political opposition is more often constructive than seen elsewhere.