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Boosted by exports, output growth is on course to exceed 3% in 2017. Growth will remain strong in 2018-19 but will slow somewhat, as private consumption softens due to the impacts of wage moderation and rising inflation on household real incomes. Investment in construction is also set to decelerate, but export demand and the implementation of some major industrial projects will support business investment.
The economic recovery and measures to contain public spending are stabilising the government debt-to-GDP ratio. Nevertheless, a rapidly ageing population will continue to strain public finances and limit output growth, calling for efficiency gains in public services and for lifting the employment rate through improved competitiveness and enhanced work incentives.
Finland’s high and increasing household indebtedness, largely in the form of mortgages, is a source of financial and macroeconomic vulnerability, although less so than in the other Nordic countries. House prices are stable, but may pick up as the economy gathers momentum. The set of macro-prudential tools is being expanded to help prevent any overheating of the housing market.