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Economic and political overview

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Despite being vulnerable to the international conjuncture, Finland is often cited as a model example for its economic performance, competitiveness and innovative success. After experiencing only a mild contraction following the COVID-19 pandemic, economic activity had already reached its pre-crisis level in mid-2021. According to IMF estimates, GDP grew 2.1% in 2022 (from +3% one year earlier) driven by strong public and private consumption (the latter being underpinned by buoyant demand for services and a strong labour market), as well as by a build-up of inventories. Finland was severely affected by the consequences of the Russia-Ukraine conflict: following its application to join NATO, Russia terminated gas and electricity exports. In this context, high energy prices and inflation, together with weaker external demand, will have a negative impact on the country’s performance, with growth projected at 0.5% in 2023, before it rebounds to 1.1% the following year (IMF – 0.2% and 1.4%, respectively, according to the EU Commission).

Finland’s public finances are generally solid, despite recording public deficits following the COVID-19 pandemic and the war in Ukraine (the Finnish government announced additional spending on defence of 0.3% of GDP in 2022 and 0.4% in 2023). According to the latest figures from the IMF, the government budget recorded a deficit of 2% in 2022, which is projected to improve only slightly this year (-1.6% of GDP) due to the measures taken to mitigate the economic and social impact of high energy prices (0.4% of GDP). Similarly, the general government public debt-to-GDP ratio increased to 66.7% in 2022 (from 66.2% one year earlier) and should follow an upward trend over the forecast horizon (67.4% and 69.6% in 2023 and 2024, respectively – IMF). Energy prices contributed to an unprecedented inflation rate of 6.5% in 2022; however, weaker economic activity and lower energy costs are projected to bring the inflation rate down to 3.5% in 2023 and 1.8% in 2024.

Finland's GDP per capita – estimated at USD 58,659 (PPP) in 2022 by the IMF - is among the highest in the world and higher than the EU-27 average, allowing the country to offer a high living standard. The distribution of wealth is relatively balanced, although social inequalities have risen in recent years. Finland is the European country most impacted by an ageing population and the fall of its labour force, a phenomenon that weighs heavily on its public finances. Other challenges that the country will be facing are the decreasing productivity in traditional industries and the need for a reduction of high labour costs. Unemployment stood at 7% in 2022 (from 7.6% one year earlier). The weakening economic conditions, which are already translating into a lower number of vacancies, imply a temporary increase in the unemployment rate in 2023 and 2024 (around 7.4% according to the IMF projections).

 
Main Indicators 202020212022 (E)2023 (E)2024 (E)
GDP (billions USD) 271.67296.59281.05301.67310.61
GDP (Constant Prices, Annual % Change) -2.43.02.10.01.3
GDP per Capita (USD) 49,16853,59550,65554,35155,957
General Government Balance (in % of GDP) -3.3-2.2-1.9-2.2-2.2
General Government Gross Debt (in % of GDP) 74.872.674.874.575.9
Inflation Rate (%) 0.42.17.25.32.5
Unemployment Rate (% of the Labour Force) 7.87.66.87.57.5
Current Account (billions USD) 1.511.27-11.92-10.18-6.80
Current Account (in % of GDP) 0.60.4-4.2-3.4-2.2

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Agriculture represents 2.3% of the Finnish GDP and employs around 4% of the population (World Bank, latest data available). Due to the unfavourable climate, agricultural development is limited to the maintenance of a certain level of self-sufficiency in basic products. Moreover, Finland's accession to the EU has further accelerated the process of restructuring and downsizing of the agriculture sector. The country has around 48,000 farms with 8% of arable land (12% of the country’s arable land is destined to organic cultivation), while 86% of the land area is covered with forests (FAO). Cereal production dominates, followed by milk production and animal husbandry. Dairy farming is the sub-sector that generates the largest turnover. According to figures from the Natural Resources Institute, after two weaker years, Finland’s cereal harvest returned to an average level in 2022, at nearly 3.6 million tons.

Industry accounts for 24.6% of GDP, employing roughly 22% of the active population. Forestry is a traditionally well-developed sector for Finland as the country exports a rich variety of goods, ranging from simple wooden products to high-tech tags, labels, paper, cardboard and packaging. Other key industrial sectors are metal production, mechanical engineering and electronic goods. Finland is also specialized in exporting information and communication technologies and is among the countries that invest substantially in R&D (around 2.94% of its GDP, World Bank). According to Statistics Finland, the value of the sold output of industry was around EUR 92.8 billion in 2021. The share of metal industry products of the total value of the sold output was around 44%, that of forestry 21%, followed by the chemical industry (18%) and food products (10%).

The services sector employs three-quarters of the workforce and accounts for 59.8% of GDP. It is also responsible for generating the largest number of new businesses. The Finnish banking system is dominated by three major groups of deposit banks: OP Group, Nordea Bank Finland, and Danske Bank Plc Group. The information technology sector is growing at a fast pace, and so are the cleantech and biotechnology sectors. The latest data by Statistic Finland shows that in the first half of 2022 the volume of service industries grew by 17% compared to one year earlier.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 3.8 21.6 74.6
Value Added (in % of GDP) 2.3 24.6 59.8
Value Added (Annual % Change) -4.5 2.8 3.7

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.890.88

Source: World Bank - Latest available data.

 

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Foreign Trade

Finland is a highly industrialised country whose economy relies heavily on foreign trade, which represented 79% of its GDP in 2021 (World Bank – latest data available). In the same year, Finland mainly exported forestry products (18.9%), chemicals (18.4%), metal and metal products (16.6%), and machinery and equipment (13%); importing chemicals (18.1%), electric and electronics industry products (14.3%), products from mining and quarrying (11%), transport equipment (10.9%) and machinery (8.9% - data Finnish Customs).

According to official government data, the main trading partners were Germany (14.9%), Russia (11.9%), Sweden (11.6%), China (9%) and the Netherlands (5.3%); while the country’s imports came chiefly from Germany (13.3%), Sweden (10.3%), the U.S. (6.8%), the Netherlands (6.3%), and Russia (5.4%).

Finland's trade balance had traditionally been positive in the past, but its performance deteriorated in the last decade, alternating slightly positive results with negative ones. In 2021, the total export of goods (at USD 82 billion, +23.8% y-o-y) almost matched the total value of imports (USD 86 billion, -+26.1% y-o-y); whereas exports of services stood at USD 32.9 billion against almost USD 35.7 billion of import (with an annual double-digit increase of 14.2% and 12.5%, respectively - data by WTO). According to the latest figures from Statistics Finland, in the first ten months of 2022 the country exported EUR 66.7 billion worth of goods, importing EUR 77.1 billion.

 
Foreign Trade Values 20172018201920202021
Imports of Goods (million USD) 70,58678,62473,71668,13485,975
Exports of Goods (million USD) 68,07375,86973,46866,19281,971
Imports of Services (million USD) 31,01235,20037,23031,72735,696
Exports of Services (million USD) 29,72931,84335,42828,82232,935

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20172018201920202021
Foreign Trade (in % of GDP) 75.178.279.671.678.6
Trade Balance (million USD) 1,6893332,5793,5963,387
Trade Balance (Including Service) (million USD) 125-3,435420750626
Imports of Goods and Services (Annual % Change) 4.35.72.4-6.06.0
Exports of Goods and Services (Annual % Change) 8.81.56.7-6.85.4
Imports of Goods and Services (in % of GDP) 37.539.739.735.739.2
Exports of Goods and Services (in % of GDP) 37.538.539.935.939.4

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20222023 (e)2024 (e)2025 (e)2026 (e)
Volume of exports of goods and services (Annual % change) 1.71.83.53.23.1
Volume of imports of goods and services (Annual % change) 7.71.02.43.72.7

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Finland is a member of the following international economic organisations: ICC, European Economic Area, WTO, European Union, G9, IMF, OECD, among others. For the full list of economic and other international organisations in which participates Finland click here. International organisation membership of Finland is also outlined here.
Free Trade Agreements
The up-to-date list of Free Trade Agreements signed by Finland can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2021
Germany 13.2%
Sweden 10.2%
United States 6.6%
Netherlands 6.1%
China 5.2%
See More Countries 58.6%
Main Suppliers
(% of Imports)		 2021
Germany 14.5%
Sweden 11.4%
China 9.0%
Netherlands 4.5%
United States 3.2%
See More Countries 57.3%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Sauli Niinistö (since 1 March 2012; re-elected for a second six-year term on 28th January 2018)
Prime Minister: Sanna Marin (since 10 December 2019) - Social Democratic Party
Next Election Dates
Presidential: January 2024
Parliament: April 2023
Current Political Context
Since December 2019, Sanna Marin from the Social Democrat (SDP) is leading a centre-left coalition with four other parties – the Centre Party (KESK), the Green League (VIHR), the Left Alliance (VAS) and the Swedish People’s Party (SFP, centre). The five-party coalition focused its action on environmentally oriented policies, supporting green industries and technologies.
The Russian invasion of Ukraine prompted Finland to reverse its non-alignment policy and apply to join NATO in May 2022. Furthermore, the government decided to increase its military spending by 0.3% of GDP in 2022 and 0.4% in 2023.
Main Political Parties
Finland has a multi-party system to ensure a single party does not have a chance to gain power alone. Parties work with each other to form coalition governments. The Social Democtratic Party, Finns, and National Coalition Party obtained a similar result in the most recent national elections (40, 39 and 38 seats, respectively). The largest parties include:

- Social Democratic Party (SDP): centre-left
- The Finns (PS): left-wing, nationalist
- National Coalition Party (KOK): centre-right, liberal conservatism, strongly pro-European
- Centre Party (KESK): centre, wields political influence in smaller agrarian communities
- Green Party (VIHR): centre, green politics, liberal
- Left Alliance (VAS): left-wing
- Swedish People's Party (RKP): centre, represents the minority of Swedish speaking people in Finland
- Christian Democrats (KD): centre/centre-right
- Finnish Reform Movement (ST): right, liberal, conservative, soft Eurosceptic.
Executive Power
The President of Finland is the Head of State, leader of foreign policy, and the commander-in-chief of the defence forces. He/she is directly elected by absolute majority for a six-year term, renewable once. The President appoints the Prime Minister. The main executive power lies in the Cabinet which is appointed and headed by the Prime Minister. Before the constitutional rewrite completed in 2000, the President enjoyed more power.
Legislative Power
Legislative power is vested in the Parliament of Finland (Eduskunta), with the Government holding limited rights to amend or extend legislation. It is composed of 200 deputies elected for four years by proportional representation. The President has the power of veto over parliamentary decisions although it can be overrun by the parliament.
 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Finland, visit the website of the Finnish Institute for Health and Welfare which provides the official data.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures

To find out about the latest public health situation in Finland and the current sanitary measures in vigour, please consult the website of the Finnish Ministry of Social Affairs and Health, as well as the dedicated page on the website of the Finnish Government.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Finnish Custom Authority (Tulli).
The “Guidelines for border management measures to protect health and ensure the availability of goods and essential services” issued by the European Commission can be consulted here.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Finland on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan

For the information on the economic recovery scheme put in place by the Finnish government to address the impact of the COVID-19 pandemic on the national economy, please visit the portal of the Finnish Ministry of Finance and that of the Ministry of Economic Affairs and Employment.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the European Commission and the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Finnish government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Finland in the IMF’s Policy Tracker platform.
Support plan for businesses

For the information on the local business support scheme established by the Finnish government to help businesses, consult the website of the Ministry for Economic Affairs and Employment, which provides instructions on business financing, on support available to sole entrepreneurs, and on entrepreneurs’ right to social security. Further information can be found on the website of the Finnish employers’ organization Yrittäjät and on that of Business Finland.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters

For the up-to-date information on possible support plans for exporters in Finland, if applicable, please consult the website of the Finnish Ministry of the Economy and that of the national export credit agency Finnvera.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.
 

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