HELSINKI, Dec. 18 (Xinhua) -- Finland's economic recovery is losing momentum as weak domestic demand drags on growth and public finances remain under pressure, the Ministry of Finance said Thursday.
In its latest Economic Survey, the ministry cut its 2025 gross domestic product (GDP) growth forecast to 0.2 percent from the 1 percent projected in September. GDP is expected to expand by 1.1 percent in 2026 and 1.7 percent in 2027.
The ministry attributed the downgrade to sluggish domestic demand and a delayed rebound in the construction sector. Prolonged uncertainty in the labor market, the geopolitical situation and the need to adjust public finances have weighed on consumer confidence, it said.
Mikko Spolander, director general of the ministry's Department of Economics, said Finland is going through a drawn-out recession. "Even though we have returned to growth, employment is growing more slowly than previously estimated. Lower accumulation of GDP is leading to wider deficits and faster growth of debt than we estimated," he said in a press release.
The survey said there are tentative signs of recovery, citing an expected pickup in consumption and investment, a more positive outlook for world trade and gradually improving employment. While global trade prospects are "surprisingly positive" despite uncertainty, the ministry noted that exports alone will not drive growth because imports are also rising alongside investment.
Finland's public finances, however, remain strained. The general government deficit is projected to narrow to 3.9 percent of GDP this year as the government's adjustment measures take effect, but is expected to widen to 4.5 percent in 2026.
Public debt has climbed above 89 percent of GDP this year, driven by persistent deficits, weak growth and higher cash collateral requirements related to currency derivatives. The debt ratio is forecast to rise to 91.6 percent in 2026 and 92.4 percent in 2027, and to exceed 96 percent by 2030, the ministry said.
"The challenges faced by Finland's public finances are not solely caused by the current prolonged economic slump. The root cause is in Finland's economic and fiscal structures," the ministry said.
On Dec. 12, the European Commission proposed a Council decision on the existence of an excessive deficit in Finland and recommendations to correct it, including a corrective net expenditure path to guide fiscal adjustment in 2026-2028, the ministry said.
"Finland will be subject to closer monitoring by the European Union (EU). We will continue our ongoing efforts to adjust public finances and will report the measures we take to the EU," Finance Minister Riikka Purra said in a government press release.
Under EU rules, a member state's general government deficit should not exceed 3 percent of GDP.
