IMF for continuation of Finland´s fiscal adjustments for years

The International Monetary Fund (IMF) recommended that Finland should continue efforts to strengthen public finances for several years, said the Ministry of Finance in a press release referring to the annual report of IMF published on Monday.

The report said that Finland should seek to consolidate by half a per cent of GDP annually and this pace of consolidation should be maintained until the fiscal balance is closed and debt is on a declining path.

The IMF’s report highlighted numerous possible adjustment measures, such as improving the efficiency of social security, cutting business subsidies and reforming pensions.

It focused structural tax reforms on removing tax expenditures for fossil fuels and bringing reduced value added tax rates closer to the general tax rate.

The report emphasised the need to boost productivity through structural reforms and to improve the functioning the labour market and upskill the labour force and said AI skills should be a particular focus.

According to the report, Finland’s economy is set to return to growth as private demand recovers, and the economy will grow about 1.5 per cent in the coming years.

Inflation will remain at two per cent, which will lead to growing real wages and disposable income, said IMF, adding that this, along with tax cuts and large household savings, will support private consumption and investments.

The IMF estimates the growth in potential output to be about one per cent.

Risks are tilted to the downside and it is primarily due to trade tensions and geoeconomic uncertainty.

The report showed that Finland’s public finances deteriorated in recent years. It was not due to the economic cycle alone, but numerous other factors as well: increased defence and immigration-related spending, rising goods and services prices, higher pension payments from inflation indexation, mounting interest expenditure, and pressure from health and social services.

These reasons have led to the deficit remaining at 4.5 per cent of GDP in 2025, despite the spending cuts implemented by the government. Without further measures, the debt ratio will approach 95 per cent of GDP by the end of the decade, said the report.

According to the IMF, Finland’s greatest growth potential lies in raising productivity, particularly through improved functioning of the labour markets, education policy and deeper integration with the EU single market.

The IMF stressed the need for measures to more effectively integrate immigrants into the labour markets, including streamlining work-based immigration procedures and expanding Finnish-language training.

The IMF also highlights AI, digitalisation and innovation preparedness as key drivers of growth. Though Finland has a strong foundation, more widespread adoption of technology might reshape the labour markets and increase the risk of structural unemployment. The situation calls for investments in tertiary education, active labour market policies and AI skills.

According to the IMF, Finland’s financial system is generally stable, and the banking sector is resilient. Systemic risks are contained, though sectoral risks remain. In particular, the IMF draws attention to real estate market risks.

The IMF published its statement on Finland on November 10, 2025 and the full report on Monday.