The immediate economic prospects of Finland hinge significantly on the endurance of the tariffs set in place by US President Donald Trump on the European Union, according to statements from the Finance Ministry. A report released by the ministry this Wednesday anticipates mild growth within the Finnish economy for this year. Nevertheless, the prospect of an extended global trade turmoil poses a considerable risk to the country’s near-term economical stability. The ministry’s projections for Finland’s Gross domestic product (GDP) growth are at 1.3 percent for 2025, however, it also outlines a critical supposition that the leader of the American government’s tariffs on the EU will only last temporarily.
The ministry report highlighted potential repercussions if the US government decides to maintain its tariffs, leading to unfavorable effects on Finland’s economy. This would be represented as stagnant growth for 2025 and 2026 and an increase in Finland’s state debt. The report also made it clear that the risks and ambiguities in relation to Trump’s trade policies have escalated to unparalleled heights. The current financial conditions of the Finnish government are already strained, providing minimal protection against the impacts of a prolonged trade war.
The forecast did not incorporate the government’s recent stimulus measures announced in the previous week. This includes a series of tax adjustments and cuts in spending. During a press conference announcing the projections, two scenarios were presented. The more hopeful of the two anticipates Finland’s GDP growing by 1.3 percent this year, 1.6 percent next year, and 1.5 percent in 2027 under the presumption of a temporary tariff.
In a situation where the tariffs are sustained, the resulting after-effects would negatively impact global economy and Finnish exports, as well as future growth projections. Even though the ministry’s perspective is more positive than recent estimations provided by the Bank of Finland and the OP Financial Group, the forecasted growth of 0.8 percent this year and 1.0 percent next year still remains modest.
The ministry’s report also stated that the rate of inflation has reduced significantly in the recent months. This trend is expected to continue through the end of this year and into 2026. The decrease in inflation has had a beneficial effect on the spending capability of Finnish households, however, these advantages are expected to be counterbalanced by an increase in the rate of unemployment and the government’s reductions in social benefits.
Unemployment rate is expected to plateau near the 9 percent mark throughout the current year, but predictions for next year are more promising, with the employment rate expected to increase to 77.3 percent. The decrease in inflation is viewed as a positive development considering the looming cloud of the trade war. This implies that an enhancement in real purchasing power of households is likely due to wage increases and is expected to continue.
Despite a few positive points in the ministry’s forecast, it was emphasized that Finland’s public financial health is in a dire condition. Earlier this year, the Bank of Finland reported that Finland’s total government debt in relation to its GDP for the previous year exceeded 80 percent, a state not likely to see dramatic improvement in the next few years.
If the trade war extends, this condition may persist for a longer time. Also, the report mentioned that more defense spending, in line with Finland’s duties as a member of Nato, will only inflate the state debt unless there is equal or greater increase in taxation or reductions in public services. Overall, Finland’s economic climate hangs in the balance as the country navigates through the turbulence of international trade wars and internal financial pressures.