Finland

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.

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.