There is light at the end of the economic tunnel, according to the Finnish finance ministry, as the country grapples with an ongoing recession and spiralling state debt.
However, in an economic forecast published on Monday morning, the ministry noted that public finances will remain in the red and Finland's national debt will continue to rise.
"It seems that the patience of those who have been waiting for an end to the economic gloom will be rewarded," the finance ministry's Mikko Spolander said at a press conference on Monday morning.
"On the other hand, the outlook for public finances cannot be viewed with the same level of confidence. Even though deficits will decrease and the level of debt will slow down, public finances will remain at risk levels."
The ministry's outlook predicted that Finland's gross domestic product (GDP) will contract slightly this year, but return to growth next year.
It said growth will particularly be driven by a rise in Finnish exports, as the global economy and the EU market recover from recent sluggish growth. Finland's competitiveness in this area is about average, the ministry said, and will not prove to be an obstacle to growth.
The ministry's outlook is in line with other recent economic predictions.
Inflation remains low
In its outlook, the ministry predicted that a slowing rate of inflation and falling interest rates will strengthen purchasing power as well as increase private consumption.
Inflation is expected to drop to about 1.8 percent this year, and the ministry anticipates the rate will remain low throughout next year.
A drop in interest rates will also help the labour market recover from the recession, the outlook noted, especially in the construction sector.
Overall, employment looks set to improve next year, and that growth will continue into 2026.
Unemployment is likely to remain at around eight percent for the remainder of this year, but will drop to about 7.2 percent next year, the ministry said.
Government spending deficits rising
However, despite some green shoots of recovery, the ministry noted that the prolonged economic downturn will continue to weigh heavily on public finances, with budget deficits expected to increase this year.
The problems within Finland's social and healthcare services sector look set to continue for the near future, the ministry said, and expenditure in this area will need to increase.
The government will also need to invest further in national security measures, further increasing state deficits, the forecast said.
Praise for government policies
The ministry's report also praised the right-wing government's austerity measures, saying it will increase tax revenue and reduce the state's expenditure on unemployment benefits.
Although the reforms have been controversial, the ministry said they will help to strengthen the Finnish economy in coming years.
These savings will however be somewhat mitigated by increased spending on defence and the servicing of Finland's ever-growing debt, the ministry noted.
Public debt is likely to increase to exceed 80 percent of GDP this year, but the economic recovery will see this figure drop from next year onwards, according to the report.
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