Finland: Economic and Political Overview
In this page: Economic Outline | Political Outline
Despite being vulnerable to the international conjuncture, Finland is often cited as a model example for its economic performance, competitiveness and innovative success. However, following a contraction in 2023 (-1.2%), Finland's real GDP growth remained weak in the first half of 2024. Goods exports dropped sharply in the first quarter due to prolonged port strikes, while private consumption stagnated amid rising unemployment and social benefit cuts. However, government consumption and net exports recently bolstered growth, with strong services exports and steady equipment investment signalling a potential recovery. Despite these positive trends, real GDP contracted an estimated 0.5% in 2024 due to a significant negative carryover effect (Bank of Finland). Real GDP is projected to grow by 1.5% in 2025 and 1.6% in 2026 according to the EU Commission (0.8% and 1.8%, respectively, as per the Bank of Finland), driven by domestic demand despite planned fiscal consolidation measures taking effect mainly in 2025.
In 2024, Finland's general government deficit rose to around 3.7% of GDP, up from 3.0% in 2023, driven by higher government spending and weaker public revenue growth. Increased government consumption, social benefits, and rising interest expenses were key factors. On the revenue side, cuts in social security contributions and lower tax receipts due to the economic slowdown further widened the gap. The deficit is projected to decline to 3% of GDP in 2025 as consolidation measures take effect and revenue benefits from economic recovery. These measures include expenditure cuts and the full impact of the 2024 VAT rate hike alongside higher taxes on income and social contributions. By 2026, the deficit is expected to shrink to 2.5% of GDP, with revenue recovery outpacing slower expenditure growth (data from the EU Commission). The general government debt-to-GDP ratio stood at 81.4% in 2023, with a small increase attributed to the primary deficit within central government finances, as well as deficits in local governments. The projection indicates a continued upward trend in the general government debt-to-GDP ratio, reaching 83.4% in 2025 and further escalating to 84.3% next year (IMF). Declining energy prices continued to slow down inflation and kept overall price increases at 1.2% in 2024 (from 4.3% one year earlier). Mostly due to the higher VAT rate, HICP inflation is forecast to increase to around 2% over the forecast horizon. High pension sector assets, totalling 94% of GDP at the end of March 2024, with over one-third held in public pension funds, remain a key rating strength. Alongside ongoing reform plans, they help alleviate the impact of a rapidly ageing population. Long-term projections suggest these assets will decline to about 75% of GDP by 2050 despite demographic challenges (Fitch Ratings).
Finland's GDP per capita – estimated at USD 57,181 (PPP) in 2025 by the IMF - is among the highest in the world and higher than the EU-27 average, allowing the country to offer a high living standard. The distribution of wealth is relatively balanced, although social inequalities have risen in recent years. Finland is the European country most impacted by an ageing population and the fall of its labour force, a phenomenon that weighs heavily on its public finances. Other challenges that the country will be facing are the decreasing productivity in traditional industries and the need for a reduction of high labour costs. Amid a declining vacancy rate, employment growth slowed to 0.8% in 2023, impacted by a sharp decline in the construction sector, while the unemployment rate rose to 7.2%. Employment contracted further in 2024, reflecting weakened economic activity, particularly in manufacturing, construction, and professional services, though labour shortages persisted in sectors like healthcare. With improving economic conditions, the unemployment rate is expected to decrease to 7.4% in 2025 and 7.3% in 2026, down from 8.3% in 2024.
| Main Indicators | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 295.62 | 306.08 | 319.99 | 333.64 | 345.73 |
| GDP (Constant Prices, Annual % Change) | -1.2 | -0.2 | 2.0 | 1.8 | 1.7 |
| GDP per Capita (USD) | 53,131 | 54,774 | 57,183 | 59,579 | 61,737 |
| General Government Balance (in % of GDP) | -1.4 | -1.6 | -1.7 | -1.6 | -1.8 |
| General Government Gross Debt (in % of GDP) | 77.0 | 81.4 | 83.4 | 84.3 | 84.8 |
| Inflation Rate (%) | 4.3 | 1.2 | 1.9 | 2.0 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 7.2 | 8.3 | 7.4 | 7.3 | 7.3 |
| Current Account (billions USD) | -3.24 | -3.54 | -3.76 | -3.62 | -3.43 |
| Current Account (in % of GDP) | -1.1 | -1.2 | -1.2 | -1.1 | -1.0 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
Agriculture represents 2.3% of the Finnish GDP and employs around 4% of the population (World Bank, latest data available). Due to the unfavourable climate, agricultural development is limited to the maintenance of a certain level of self-sufficiency in basic products. Moreover, Finland's accession to the EU has further accelerated the process of restructuring and downsizing of the agriculture sector. The country has around 42,000 farms with 8% of arable land (12% of the country’s arable land is destined for organic cultivation), while almost three-quarters of the land area is covered with forests (FAO). According to preliminary statistics, the area of agricultural land in use in 2024 was just under 2.3 million hectares, with around 2 million hectares dedicated to arable land. Nearly half of Finland's arable land is used for cereals, while about a third is allocated to fodder grass. Cereal production dominates, followed by milk production and animal husbandry. Dairy farming is the sub-sector that generates the largest turnover. According to figures from the Natural Resources Institute, there were a total of 40,871 agricultural and horticultural enterprises in Finland in 2024 of which 84% were family-run, 9% were farming syndicates, while farms owned by heirs and limited liability farms represented about 6%.
Industry accounts for 23.9% of GDP, employing roughly 22% of the active population. Forestry is a traditionally well-developed sector for Finland as the country exports a wide variety of goods, ranging from simple wooden products to high-tech tags, labels, paper, cardboard and packaging. Other key industrial sectors are metal production, mechanical engineering and electronic goods. Finland also specialises in exporting information and communication technologies and is among the countries that invest substantially in R&D (around 2.99% of its GDP, World Bank). Overall, manufacturing contributes 15% of GDP. According to Statistics Finland, the value of the sold output of the industry was around EUR 95.5 billion in 2023 (-9%% y-o-y). The metal industry products accounted for EUR 40.4 billion, followed by chemicals (EUR 21.2 billion), and forestry (EUR 16.2 billion).
The services sector employs roughly three-quarters of the workforce and accounts for 61.4% of GDP. It is also responsible for generating the largest number of new businesses. The Finnish banking system is dominated by three major groups of deposit banks: OP Group, Nordea Bank Finland, and Danske Bank Plc Group. The information technology sector is growing at a fast pace, and so are the cleantech and biotechnology sectors. The latest data by Statistic Finland shows that in 2024 the volume of service industries grew by 2.8% compared to one year earlier.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 3.6 | 21.6 | 74.8 |
| Value Added (in % of GDP) | 2.3 | 23.9 | 61.4 |
| Value Added (Annual % Change) | -8.1 | -2.0 | 0.3 |
Source: World Bank, Latest data available.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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