(Bloomberg) -- The Finnish economy will probably deliver a slightly stronger rebound next year, according to the country’s finance ministry, which cited a boost from slowing inflation and lower cost of borrowing.
Finland’s gross domestic product is set to expand 1.7% in 2025, versus 1.6% projected in June, followed by 1.5% growth in 2026, the ministry said on Monday.
The projected expansion in the northernmost euro area economy, one of the worst performers in Europe for past two years, will be driven by an increase in household consumption as inflation loses pace and interest rates fall. Capital allocations into energy transition and security will spur investment, while the export industries will perk up on the back of brighter global trade.
The ministry’s forecast chimes with those of the Bank of Finland and ETLA research institute who published their projections last week, expecting a pick up of 1.1% and 1.4% next year, respectively. This year’s contraction is seen at 0.2% even as the projected expansion will strengthen toward the end of the year, the ministry said.
Finland’s public debt ratio is expected to improve moderately next year too due to the government’s austerity measures, the ministry said. Its budget deficit will probably shrink to 3.2% of GDP from the projected 3.7% this year. That means the nation would still remain above the 3%-threshold set for European Commission’s Excessive Deficit Procedure, which aims to bring public deficits and debt back into line if they swell too much.
Finland’s public finances remain at a “risky level” even amid decreasing deficit and indebtedness, as well as a turnaround in the economy, according to Director General Mikko Spolander.
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