Finnish economy and public finances

Finnish GDP is expected to have grown by 3.1% in 2017, the fastest rate for many years. As regards 2018, economic growth is forecasted to continue at 2.4%. Supported by higher employment, private consumption grew in 2017. Also all types of private investment developed strongly while exports benefited from better price competitiveness and stronger international demand. Both private investments and exports grew by almost 7% in 2017.

The economy grew by 3.1% in 2017.

Finland’s GDP is expected to have grown by 3.1% in 2017. In the first half of the year, unemployment declined at a very slow rate but came down more rapidly later in the year. More rapid economic growth was accompanied by a significantly higher employment rate even though there were also major improvements in labour productivity. Reflecting a brighter economic outlook the employment rate will increase to over 70% in 2018

GDP and employment Zoom GDP and employment graph
Private investment increased by 6.8% in 2017.

Supported by a higher employment, private consumption continued to grow in 2017, there were still no signs of a slowdown in housing construction and companies made substantial investments in production capacity. Growth in world trade and economic expansion in most of Finland’s main export markets helped Finnish exports to recover.

Contribution GDP growth in Finland Zoom Contribution GDP growth in Finland graph
Export volume increased by 6.8% in 2017.

Finnish exports picked up substantially in 2017. There was brisk growth in the exports of both goods and services during the first three quarters of the year. World trade was growing faster than in the past few years, which also helped to boost Finnish exports. Demand in the main export markets rebounded. Despite stronger export growth, Finland's current account will remain in deficit during the forecast period because imports will also grow.

Current account balance Zoom Current account balance graph
General government financial balance was -1.2% of GDP in 2017.

The general government’s deficit has decreased starting from the middle of the decade. First the deficit shrunk due to consolidation measures taken by the Government and later also due to positive economic cycle. As regards the sub-sectors of the general government, the central government and the local government are still running a deficit while the earnings-related pension institutions are running a surplus.

Financial balance of general government Zoom Financial balance of general government
Earnings-related pension assets were EUR 198.9 billion in 2017 (Q3).

The general government debt-to-GDP ratio started to decline in 2016. By 2019, the debt ratio will shrink to just under 60 per cent. However, in nominal terms the debt will continue to grow. As regards general government assets, earnings-related pension assets have increased substantially in recent years.

General government revenue tax revenue and expenditure Zoom General government revenue tax revenue and expenditure graph
The central government debt relative to GDP was 47.1% in 2017.

The central government deficit has decreased in recent years and this trend is forecasted to continue. Good economic cycle supports growth in tax revenue, but on the other hand the favourable growth of tax revenue will be hindered in 2017 and 2018 by discretionary tax cuts. The central government’s nominal debt will continue to grow although at a slower pace. The debt-to-GDP ratio will decline.

Central government financial balance Zoom Central government financial balance graph
Key figures Zoom Key figures graph

The text is based on the Economic Survey of the Ministry of Finance (Winter 2017) released on 19 December 2017. All figures for 2017–2019 are forecasts by the Ministry of Finance.