There is now a better opportunity for adjustment — and a greater need for it

Finland’s GDP grew 0.8% in Q1 2026 and 0.4% in Q2, and recently revised national accounts show last year’s turnaround was stronger than previously estimated. Growth now rests on a broader base: exports are pulling, the current account turned into surplus last year, several industrial sectors are performing well, and data-center investment prospects are strong, while construction and domestic consumption still lag. Labore forecasts 1.7% GDP growth this year and an average of 1.5% for 2027–2028, while cautioning that past forecasts have often missed the mark.

The second half of the report’s title refers to the renewal of Finland’s corporate sector since the 2010s — a theme tied to last year’s Nobel Prize in Economics awarded to Aghion, Howitt and Mokyr for the theory of creative destruction. In Finland, young, R&D-intensive firms have grown rapidly: nearly half of corporate patent applications now come from firms under ten years old, and private service-sector R&D spending has risen sharply.

Still, the starting point is difficult: trend unemployment stood at 10.5% in July, with over 140,000 long-term unemployed, and the general government deficit is expected to reach 4.4% of GDP this year, with debt exceeding 90% and approaching 100% by 2030. Because growth is now export-led rather than domestic-demand-led, the cyclical risks of fiscal consolidation are smaller than a couple of years ago — though not eliminated — while the rapid rise in debt has increased the need for adjustment. That adjustment should avoid eroding skills, research and development, since doing so would narrow the tax base needed to curb the debt ratio, and its welfare effects across household groups need careful assessment. Sharper competition policy and critical review of business subsidies are highlighted as central to growth, along with a well-informed, data-driven wage-negotiation process in the labor market. (AI translation)

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