FINLAND IMFCountryReportNo.25/10 January2025 2025ARTICLEIVCONSULTATION—PRESSRELEASE;STAFFREPORT;ANDSTATEMENTBYTHEEXECUTIVEDIRECTORFORFINLAND UnderArticleIVoftheIMF’sArticlesofAgreement,theIMFholdsbilateraldiscussionswithmembers,usuallyeveryyear.Inthecontextofthe2025ArticleIVconsultationwithFinland,thefollowingdocumentshavebeenreleasedandareincludedinthispackage: APressReleasesummarizingtheviewsoftheExecutiveBoardasexpressedduringitsJanuary15,2025considerationofthestaffreportthatconcludedtheArticleIVconsultationwithFinland. TheStaffReportpreparedbyastaffteamoftheIMFfortheExecutiveBoard’sconsiderationonJanuary15,2025,followingdiscussionsthatendedonNovember8,2024,withtheofficialsofFinlandoneconomicdevelopmentsandpolicies.Basedoninformationavailableatthetimeofthesediscussions,thestaffreportwascompletedonDecember12,2024. AnInformationalAnnexpreparedbytheIMFstaff. AStatementbytheExecutiveDirectorforFinland. TheIMF’stransparencypolicyallowsforthedeletionofmarket-sensitiveinformationandprematuredisclosureoftheauthorities’policyintentionsinpublishedstaffreportsandotherdocuments. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.org InternationalMonetaryFundWashington,D.C. ©2025InternationalMonetaryFund PR25/005 IMFExecutiveBoardConcludes2025ArticleIVConsultationwithFinland FORIMMEDIATERELEASE Washington,DC–January21,2025:OnJanuary15,theExecutiveBoardoftheInternationalMonetaryFund(IMF)concludedtheArticleIVconsultation1withFinland. TheFinnisheconomyisrecoveringfromthe2023recession,supportedbyeasinginflationandrealwagegrowth.However,thereboundishinderedbystagnantconstructioninvestmentandweakexternaldemand.Employmentremainsrobust,drivenbylowerrealwages,increasedimmigration,higherpublicemployment,andincreasedparticipationrates.Inflationhastemporarilyfallenbelow2percent,reflectingdecliningenergypricesandsubdueddomesticdemand. Theeconomyisprojectedtohavecontractedby0.3percentin2024beforereboundingtoaround1½percentin2025,asprivateinvestmentandconsumptionrecoveralongsideeasinginterestratesandstabilizinghouseprices.Externaldemandwillpickupsomewhatbutwillbeoffsetbystrongerimports.Risksremaintiltedtothedownside,withintensificationofregionalconflictsandgeopoliticalfragmentation.Structuralchallenges,suchasadversedemographicsandlowproductivitygrowth,weighonthemedium-termoutlook.SupportedbytherecentVAThikeandrecoveringdomesticdemand,inflationisexpectedtostabilizearound2percentin2025. ExecutiveBoardAssessment2 DirectorswelcomedFinland’sstrengtheninggrowthmomentumfollowingthe2023recessionandthedeclineininflation.However,theoutlookiscloudedbylongstandingstructuralchallenges,includingfromlowproductivitygrowthandagingpopulation,andrisksaretiltedtothedownside,particularlyontheexternalfront.Tostrengthentheeconomy’sresilience,Directorshighlightedtheneedtoensurefiscalsustainabilityandfinancialstability,whileimplementingstructuralreformsfocusedonboostingpotentialgrowth. 1UnderArticleIVoftheIMF'sArticlesofAgreement,theIMFholdsbilateraldiscussionswithmembers,usuallyeveryyear.Astaffteamvisitsthecountry,collectseconomicandfinancialinformation,anddiscusseswithofficialsthecountry'seconomicdevelopmentsandpolicies.Onreturntoheadquarters,thestaffpreparesareport,whichformsthebasisfordiscussionbytheExecutiveBoard. 2Attheconclusionofthediscussion,theManagingDirector,asChairmanoftheBoard,summarizestheviewsofExecutiveDirectors,andthissummaryistransmittedtothecountry'sauthorities.Anexplanationofanyqualifiersusedinsummingsupcanbefoundhere:http://www.IMF.org/external/np/sec/misc/qualifiers.htm. Directorscommendedtheauthorities’ongoingfiscalefforts,whileemphasizingtheneedforadditionalconsolidationtoreversepublicdebtdynamicsamidpressuresfromdefenseandaging-relatedspending.Theyconcurredthattheadjustmentshouldinvolvebothspendingand revenuemeasures,whileprotectingproductivity-enhancingspending,includingpublicinvestments,education,andR&D. Directorswereencouragedbytheresilienceofthebankingsystembutnotedremainingpocketsofvulnerability,includingfromhighrelianceonwholesalefunding,householdindebtedness,andcross-borderrisks.Theywelcomedthereinstatementofthesystemicriskbufferandrecommendedfurtherstrengtheningofthemacroprudentialtoolkit.DirectorscommendedFinland’sinitiativeinconductingjointNordicandBaltic-widebankingsectorstresstests,andurgedcontinued monitoringoffinancialstabilityrisksrelatedtonon-bankfinancialinstitutions.TheyalsoencouragedfurtherstrengtheningtheAML/CFTframework. DirectorsagreedthatstructuralreformsareessentialforenhancingFinland’spotentialgrowth.Theywelcomedtherecentlabormarketreforms,andencouragedfurthereffortstoincreaselaborforceparticipationrates,reduceskillmismatches,andaddressthesteepdeclineinaveragehoursworkedsincethepandemic.Exploringfurthermeasurestoimproveproductivity,includingbyeasingaccesstoriskcapital,reviewingbarrierstoentryintotheservicessector,andpromotingthedeepeningofth