Russia’s war of aggression against Ukraine has darkened the short-term economic outlook for Finland and increased the urgency of transitioning away from fossil energy. The Finnish economy is likely to contract over coming quarters, weighed down by high inflation, tightening monetary conditions and curtailment of Russian gas supplies to trading partner economies, but to recover in 2024 as these headwinds pass. The war has also worsened public finances, delaying needed consolidation measures to rebuild buffers to cope with future shocks and put public finances on a sustainable path. While Finland is on track to meet its gross greenhouse gas emissions abatement objectives, there is scope to reduce abatement costs, notably by replacing inefficient measures by a comprehensive carbon tax in the effort-sharing sector. New measures will also be needed to meet the forestry and other land-use targets, which are very challenging. Rebooting innovation ecosystems would help to increase Finland’s low productivity growth. This will entail not only increasing R&D spending, but also establishing a mission-oriented innovation policy and a more diversified innovation ecosystem, strengthening synergies between export promotion and innovation, and above all, increasing the supply of skilled workers.