Finland's economic recovery this year has been weaker than expected, according to the Ministry of Finance's economic forecast.
In a press release on Thursday, the ministry said the "general government deficit is wide, and the debt ratio will continue to grow."
It now forecasts 0.2 percent year-on-year growth of Finland's GDP this year.
It said that the economy is expected to recover next year, with 1.1 percent growth of GDP in 2026 and 1.7 percent GDP growth in 2027. Then, in 2028, the ministry forecasts that GDP will grow by 1.6 percent.
The ministry partly blamed the lagging growth on a lack of domestic demand.
It said that despite an increase in incomes, household consumption has not grown.
"In construction, recovery is waiting for the housing market to pick up more energetically. The uncertainties related to the labour market, geopolitical situation and the need to adjust public finances have undermined consumer confidence for an exceptionally long time and have caused consumers to put off purchases," the release stated.
Drawn-out recession
According to the ministry's Director General, Mikko Spolander, Finland is experiencing a drawn-out recession.
"Even though we have returned to growth, employment is growing more slowly than previously estimated. Lower accumulation of GDP is leading to wider deficits and faster growth of debt than we estimated," Spolander said in the release.
The EU Commission has called on Finland to reduce its public finance deficit under the provisions of the EU's excessive debt procedure (EDP).
The ministry also said that unemployment has risen sharply over the past year, noting the joblessness was "caused by growth of the labour force".
"The growth of the labour force has been caused by immigration and the government's measures to boost employment. The employment rate has grown slightly over the past few months. This growth is expected to speed up next year," the ministry release read.
It forecast that employment would increase by one percent annually from 2026-2028, "as the economy improves".
According to the ministry, unemployment is expected to fall from 9.6 percent this year to 8.5 percent in 2028.
Additionally, it said that household consumption would recover next year.
"Inflation will also be moderate and below the euro area average. Household consumption will also be driven by the saving [interest] rate returning closer to normal levels," the ministry's release read.
