Any chance of economic growth will depend heavily on when and how the crisis in the Middle East is resolved, the ministry’s report stated.
The Ministry of Finance has downgraded its forecast for the Finnish economy, noting in a report published on Thursday that growth will be weaker than expected this year.
The ministry cited the effects of the ongoing crisis in the Middle East as one of the main reasons the economy will recover at a slower rate than previously expected — with gross domestic product (GDP) growth expected to stand at a modest 0.6 percent this year.
The ministry had forecast growth of 1.1 percent for this year as recently as last December.
“When it comes to the economic situation, the only thing we know for sure is that the crisis in the Middle East is increasing instability and uncertainty, hindering economic growth and driving inflation in Finland this year,” the ministry’s director general, Mikko Spolander, said.
In addition, Spolander said the crisis is piling further economic pain on Finland’s already beleaguered public finances, with the general government deficit predicted to remain large and even widen over the coming year.
However, some green shoots are visible, the ministry’s report noted, as GDP is forecast to grow by 1.7 percent in 2027 and 2028 according to current estimates.
This is, however, dependent on a fall in oil prices and a quick resolution to the crisis in the Middle East.
“We must hope that the crisis is resolved quickly and with little damage,” Spolander said.
No relief in sight for jobs market
In relation to Finland’s employment situation, which sank to the lowest level in the EU at the turn of this year, the ministry said it does not yet see any light at the end of the tunnel.
“The employment rate will only start rising and the unemployment rate declining as economic growth picks up in 2027,” the report noted.
Deficit continues to grow
The ministry also expects slow growth and increasing expenditures to keep Finland’s public finances deeply in deficit.
Finland’s general government deficit stood at 3.4 percent of GDP last year, the report said, and this is forecast to increase to 4.6 percent this year due to the crisis in the Middle East as well as other factors, including expenditure for Finland’s fighter jet purchases.
“The foreseeable rate of economic growth will not be enough to halt the growth of the debt ratio if the debt-accumulating deficit remains this wide. The cumulative debt-to-GDP ratio exceeded 88 percent in 2025, and it will exceed 91 per cent this year,” the report said.
Based on current estimates, Finland’s debt ratio will continue to grow over the rest of this decade and will exceed 99 per cent in 2030, the ministry concluded.
