Finland's Economy Recovers, Deficit Persists

Finland is emerging from recession, with the Ministry of Finance projecting a slight GDP contraction of 0.2% in 2024 but a recovery to 1.7% growth in 2025. Despite the economic recovery, public finances will remain in persistent deficit, with the deficit-to-GDP ratio expected to be 3.7% this year, above the EU's 3% guideline. Minister Riikka Purra expressed confidence that further austerity measures are unlikely, but the situation will be reassessed by the European Commission in November. While export demand is set to rise due to global trade recovery, the overall outlook for public finances is concerning as national debt continues to grow. Slower inflation and lower interest rates are anticipated to boost private consumption and aid the construction sector. The government's commitment to reducing the deficit aims to bring it down to 2.9% next year, reflecting a cautious optimism amid ongoing fiscal challenges.