Middle East Crisis Drags Down Finnish Economy, GDP Growth May Only Reach 0.6%
The Finnish Ministry of Finance announced that due to the Middle East crisis, the 2024 GDP growth forecast has been revised down to 0.6%, and the public deficit is expected to expand to 4.6% of GDP. If the situation does not improve, the debt-to-GDP ratio could exceed 99% by 2030, risking EU oversight.
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- 📰 Published: April 30, 2026 at 19:45
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Helsinki, April 30 (CNA) The Finnish Ministry of Finance today released its spring economic forecast, revising down its 2024 gross domestic product (GDP) growth forecast to 0.6% due to the Middle East crisis, with the public deficit expected to expand to 4.6%. The Ministry of Finance warned that if the situation does not improve, Finland's debt-to-GDP ratio could exceed 99% by 2030.
Mikko Spolander, Director General of the Ministry of Finance's Economics Department, stated bluntly at a press conference that the uncertainty brought by the Middle East situation is currently the "only certainty."
This crisis is dragging down Finland's economic growth this year, pushing up inflation, and exacerbating already difficult public finances. He stated that the only hope is for the crisis to end as soon as possible to reduce its impact on the economy.
The Ministry of Finance predicts that if oil prices fall back and the economy gradually emerges from its slump, GDP growth is expected to rebound to 1.7% in the next two years.
However, according to Finnish National Broadcasting Company (Yle) reports, Janne Huovari, a senior advisor at the Ministry of Finance, also presented a pessimistic scenario: if oil prices rise by another 30%, Finland's economic growth this year could fall to zero.
In addition, the ongoing war in Ukraine and the structural impact brought by the rapid development of artificial intelligence (AI) are also potential concerns.
Soaring oil prices not only push up inflation, squeezing household purchasing power, but also weaken Finland's export competitiveness. Although non-energy commodity price increases have been relatively moderate, keeping consumer price inflation around 2%, Yle reports that the public's expected inflation rate is about 5%. This perception gap is one of the main reasons for suppressed consumption.
Facing an uncertain outlook, people tend to postpone consumption and increase savings. Private consumption is not expected to recover until purchasing power improves in 2027.
Finland's unemployment rate is among the highest in the EU, having exceeded 10% for several consecutive months. According to Yle, the number of unemployed people in March reached 315,000. The Ministry of Finance admitted that although employment policies and increased immigration have expanded the labor supply, job opportunities have not grown at the same pace. The unemployment rate is not expected to start declining until the economy recovers in 2027.
Regarding public finances, Finland's public deficit-to-GDP ratio was 3.4% last year and is expected to expand to 4.6% this year. The main reasons, in addition to the Middle East crisis suppressing growth, include the start of accounting for fighter jet procurement expenditures and a slower pace of fiscal adjustment. Jenni Pääkkönen, a senior advisor at the Ministry of Finance, pointed out that due to faster expenditure growth and slower tax revenue growth, the deficit ratio is likely to remain at 4.6% until 2029, possibly slightly decreasing to 4.4% by 2030.
Defense procurement, energy, and technology transformation are expected to drive investment in machinery and equipment and construction; however, real estate development and construction face a long road to recovery due to weak demand.
Regarding the public debt-to-GDP ratio, it already exceeded 88% in 2025, is expected to break 91% this year, and will approach 100% by 2030. Spolander warned that the current deficit scale has triggered the EU's deficit surveillance procedure, and the EU may determine that Finland has not fully implemented the Commission's recommendations, leading to further intervention measures. (Edited by Chen Cheng-kung) 1150430
Mikko Spolander, Director General of the Ministry of Finance's Economics Department, stated bluntly at a press conference that the uncertainty brought by the Middle East situation is currently the "only certainty."
This crisis is dragging down Finland's economic growth this year, pushing up inflation, and exacerbating already difficult public finances. He stated that the only hope is for the crisis to end as soon as possible to reduce its impact on the economy.
The Ministry of Finance predicts that if oil prices fall back and the economy gradually emerges from its slump, GDP growth is expected to rebound to 1.7% in the next two years.
However, according to Finnish National Broadcasting Company (Yle) reports, Janne Huovari, a senior advisor at the Ministry of Finance, also presented a pessimistic scenario: if oil prices rise by another 30%, Finland's economic growth this year could fall to zero.
In addition, the ongoing war in Ukraine and the structural impact brought by the rapid development of artificial intelligence (AI) are also potential concerns.
Soaring oil prices not only push up inflation, squeezing household purchasing power, but also weaken Finland's export competitiveness. Although non-energy commodity price increases have been relatively moderate, keeping consumer price inflation around 2%, Yle reports that the public's expected inflation rate is about 5%. This perception gap is one of the main reasons for suppressed consumption.
Facing an uncertain outlook, people tend to postpone consumption and increase savings. Private consumption is not expected to recover until purchasing power improves in 2027.
Finland's unemployment rate is among the highest in the EU, having exceeded 10% for several consecutive months. According to Yle, the number of unemployed people in March reached 315,000. The Ministry of Finance admitted that although employment policies and increased immigration have expanded the labor supply, job opportunities have not grown at the same pace. The unemployment rate is not expected to start declining until the economy recovers in 2027.
Regarding public finances, Finland's public deficit-to-GDP ratio was 3.4% last year and is expected to expand to 4.6% this year. The main reasons, in addition to the Middle East crisis suppressing growth, include the start of accounting for fighter jet procurement expenditures and a slower pace of fiscal adjustment. Jenni Pääkkönen, a senior advisor at the Ministry of Finance, pointed out that due to faster expenditure growth and slower tax revenue growth, the deficit ratio is likely to remain at 4.6% until 2029, possibly slightly decreasing to 4.4% by 2030.
Defense procurement, energy, and technology transformation are expected to drive investment in machinery and equipment and construction; however, real estate development and construction face a long road to recovery due to weak demand.
Regarding the public debt-to-GDP ratio, it already exceeded 88% in 2025, is expected to break 91% this year, and will approach 100% by 2030. Spolander warned that the current deficit scale has triggered the EU's deficit surveillance procedure, and the EU may determine that Finland has not fully implemented the Commission's recommendations, leading to further intervention measures. (Edited by Chen Cheng-kung) 1150430