IMF praises Finland’s new fiscal framework

The International Monetary Fund (IMF) estimates that Finland should consolidate general government finances by about EUR 1.5 billion annually. Consolidation should be continued until the fiscal balance is closed and debt begins to decline. The IMF published its statement on the Finnish economy on Monday 10 November.

The report praises Finland’s new national fiscal framework. According to the IMF, the reform demonstrates a strong cross-party commitment to consolidation. 

The IMF stated that Finland should seek to consolidate by half a per cent of GDP annually. This would correspond to EUR 1.5 billion a year. According to the IMF, this pace of consolidation should be maintained until the fiscal balance is closed and debt begins to decline. 

Minister of Finance Riikka Purra finds the IMF's view of the need for fiscal adjustment to be roughly correct.

“The IMF’s estimate of the scale of the necessary adjustments is roughly the same as the Ministry of Finance's estimate in the reform of fiscal policy rules. The hardest work remains ahead: making decisions on new adjustments. This will take at least two parliamentary terms,” Minister Purra says.

Economic growth expected to accelerate next year

The Finnish economy has recovered slowly, but the IMF forecasts that growth will accelerate to 1.5 per cent in 2026 and 2027. The general government deficit will remain broadly unchanged this year due to weak public revenue growth, higher defence spending and pressure from health and social services.

General government debt is expected to approach 90 percent of GDP this year, according to the IMF.

“Economic growth in the coming years will ultimately decide what the required adjustments will be. They will in any case be significant. I myself have considered EUR 10 billion to be a justified amount for adjustments in the next parliamentary term,” Minister Purra says.

The IMF also draws attention to the resilience of the banking and financial system. Despite a prolonged rise in cyber threats, the impact on financial stability has so far remained contained.

Recommendations include bolstering skills and facilitating AI adoption

The IMF notes that the Government’s labour market reforms and increased immigration have supported an increase in labour supply. Changes to unemployment benefits have also strengthened incentives to accept work.

The IMF recommends that Finland develop active labour market policies and upskill the labour force, which will be crucial to facilitate AI adoption.  The IMF encourages Finland to boost tertiary education attainment, as Finland has fallen behind peer countries. 

“The Government has already taken measures to boost tertiary education. I am glad that the IMF brought up adoption of artificial intelligence, as AI could have an impact on economic growth and the labour market,” Minister Purra said.

The IMF encourages Finland to ease regulatory barriers to businesses in order to boost productivity. Finland should also continue efforts to improve access to funding and investment.

Statement a part of IMF country monitoring

The IMF issues statements on all its member countries as part of its country monitoring activities. The IMF's visits to member countries are called Article IV Consultations, because they are required by Article IV of the IMF's Articles of Agreement. 

The statement is based on assessments by IMF experts and on discussions they have had with Finnish authorities, labour market organisations, financial institutions, research institutes and other organisations. The IMF will publish its full report early next year.

Inquiries:
Sari Sontag, Senior Ministerial Adviser, tel. +358 295 530 181, sari.sontag(at)gov.fi
Jussi Lindgren, Economic Policy Adviser to the Minister of Finance, tel. +358 295 530 514, jussi.lindgren(at)gov.fi