Finland's economy will return to growth this year as employment recovers from a recent downward trend, according to a report published on Tuesday by the International Monetary Fund (IMF), the UN's financial agency.
In its report, the IMF noted that lower inflation and the growth of real wages are helping the Finnish economy recover quickly from the 2023 recession, but it issued several words of warning — especially in relation to stagnant investment in the construction sector as well as weakened external demand.
"Employment remains robust, driven by lower real wages, increased immigration, higher public employment, and increased participation rates. Inflation has temporarily fallen below 2 percent, reflecting declining energy prices and subdued domestic demand," the report stated.
Finland's economy is expected to have contracted by 0.3 percent during 2024, but will grow by 1.5 percent this year, according to the IMF's figures, with the country's inflation rate stabilising at 2 percent.
The report's authors credit the Finnish government's austerity measures and adjustments to labour laws in reversing the economy's slowdown.
"[The IMF] welcomed the recent labour market reforms, and encouraged further efforts to increase labour force participation rates, reduce skill mismatches, and address the steep decline in average hours worked since the pandemic," the report said.
It also recommended that Finland increase the number of higher education graduates and step up efforts to attract educated foreign workers to the country.
However, the agency noted that the Finnish government must do more to tackle the nation's spiralling state debt, especially in light of "pressures from defence and aging‑related spending".
"The outlook is clouded by longstanding structural challenges, including from low productivity growth and aging population, and risks are tilted to the downside, particularly on the external front," the IMF said.
The IMF's predictions for the Finnish economy this year are more optimistic than those offered by Finnish economists in December, with Mauri Kotamäki, Chief Economist at Finnvera, noting that any economic growth exceeding one percent should be considered a positive surprise.
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