IMF forecasts Finnish economic recovery and improved employment in 2025

By admin On Jan 22, 2025

LEHTIKUVA

Finland’s economy is set to rebound with a 1.5 percent growth rate this year, accompanied by a strengthening employment market, according to a report released Tuesday by the International Monetary Fund (IMF). The recovery follows a 0.3 percent contraction in 2024, as the country emerges from a challenging economic period.

The IMF credits the recovery to falling inflation, increasing real wages, and targeted reforms, but warns of ongoing vulnerabilities.

The report highlighted robust employment figures, citing lower real wages, increased immigration, higher public employment, and rising participation rates as key contributors. Inflation has temporarily dropped below 2 percent, largely due to declining energy costs and muted domestic demand.

Despite these improvements, the IMF emphasised the need for further measures to address Finland’s structural economic challenges. The report praised recent labour market reforms, urging additional efforts to boost workforce participation, reduce skill mismatches, and reverse a decline in average working hours since the pandemic.

The IMF noted that Finland must contend with low productivity growth and an aging population, both of which pose risks to sustained recovery. To combat these issues, the report recommended increasing the number of higher education graduates and attracting skilled foreign workers.

The agency also expressed concern over Finland’s growing state debt, exacerbated by defense spending and aging-related costs.

“Pressures from defense and aging-related spending require immediate attention to avoid further fiscal strain,” the IMF stated.

The IMF’s projections are more optimistic than those of Finnish economists. In December, Mauri Kotamäki, Chief Economist at Finnvera, suggested that any economic growth above one percent in 2025 would be a welcome surprise.

Source: www.helsinkitimes.fi