Finland: Macroeconomic Country Outlook
- GlobalData forecasts Finland’s real GDP to grow by 1.9% in 2022
- Finland was ranked 10th out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
- According to GlobalData, the country’s service sector grew by 5.7% in 2021
Finland ranked 20th out of 190 countries, according to the World Bank, Doing Business Report (2020). According to the report, minimum capital (as a % of income per capita) to start a business is only 5.9%, which is below the OECD high income average of 7.6%. In addition, just three procedures are needed to start a business in Finland, in comparison to the OECD high income average of 4.9 procedures. Finland also performs well in comparison to the OECD average on other indicators, such as dealing with construction permits, getting electricity, registering property, paying taxes, trading across borders, enforcing contracts, getting credit, and resolving insolvency. These indicators speak volumes about the business-friendly environment in Finland.
Key findings
- Recovery and Resilience Facility: On October 4, 2021, the European Commission approved a grant of EUR2.1 billion ($2.5 billion) under the Recovery and Resilience Facility (RRF), which aims to foster a recovery in the nation. The plan is expected to boost the country’s gross domestic product by 0.4% to 0.6% by 2026. The plan would also introduce up to 8,000 additional jobs in the country by 2026. The RPF facility allocated EUR695 million ($822.1 million) to support green transition in Finland. Moreover, the EU also provides EUR575 million ($680.2 million) for employment and skills development, EUR353 million ($417.6 million) for health and social services and EUR190 million ($224.8 million) for digitalization across the country. The regulation will be completed by August 2026.
- Finland’s stance on Russia’s invasion of Ukraine: The government condemned Russia’s invasion of Ukraine. The country granted EUR21 million ($24.8 million) to support Ukraine, which also includes EUR9.2 million ($10.9 million) for humanitarian assistance and EUR11.8 million ($14 million) channeled to the development cooperation of Ukraine. Additionally, the country also provided protective military equipment and arms assistance to Ukraine. The country also announced to provide material assistance to Ukraine based on its needs. Finland allocated EUR1 million ($1.2 million) to humanitarian aid through the United Nations Refugee Agency (UNHCR) to support Ukrainians who fled to Moldova.
- Robust foreign relation: In February 2022, the US state of Colorado and Finland signed a MoU to create collaborative opportunities with respect to bilateral foreign direct investment, research and development projects, and company exchanges. In April 2022, India and Finland signed an agreement to establish an Indo-Finnish Virtual Network Center on Quantum Computing. The aim of the agreement is to stimulate innovative R&D projects that demonstrate high industrial relevance. In April 2022, Morocco and Finland held discussions to boost security cooperation between the two nations. In June 2022, Finland and Ghana signed a MoU to establish political consultations. In July 2022, Finland and Thailand renewed MoU on digital cooperation. In August 2022, Finland, Sweden and Turkey announced to held a meeting for NATO membership.
- Robust ranking on governing indicators: According to the World Justice Project, WJP Rule of Law Index (2021), Finland ranked third out of 139 economies on the rule of law parameter. The nation ranked second out of 139 economies on the criminal justice indicator. On the fundamental rights parameter, the nation ranked third out of 139 economies. On the regulatory enforcement parameter, which measures the extent to which regulations are effectively implemented and enforced, Finland ranked third out of 139 countries. Lastly, on the civil justice indicator, where the index measures whether ordinary people can resolve their grievances, Finland ranked sixth out of 139 nations.
- Step toward renewable energy in the country: In December 2021, the European Investment Bank signed an equity co-investment with the Omnes-managed Capenergie fund to develop a 3GW project. The facility is expected to get operational by 2027. In May 2022, the parliament of Finland approved new Climate Change Act by 121-42 votes, which seeks to achieve carbon neutrality by 2035 through the reduction of greenhouse gas emissions in Finland and promote climate change adaptation. The climate act came i,nto force on July 1, 2022. In June 2022, Ilmatar Energy anticipated to construct a solar park in Joroinen, Finland. In July 2022, a Germany-based company, Nordex announced to deliver and install turbines for a 147.5MW onshore wind project in Finland's North Ostrobothnia region. The wind farm is due to be completed by the end of 2024.
- Integration of digital technology: According to the EU, Digital Economy and Society Index (2022), the country allocated various amounts for the integration of digital technology, which includes (i) EUR50 million ($59.1 million) for high-speed broadband infrastructure across Finland (ii) EUR85 million ($100.5 million) for the Digirail project to roll out the new automatic train protection system on the entire national railway network by 2040, along with the 4G and 5G based Future Railway Mobile Communication System (iii) EUR100 million ($118.3 million) for digital innovation in social welfare and healthcare services.
Key fundamentals
Sectoral outlook
- Revival for travel and tourism industry: The tourism sector is a major contributor to the economy. Lapland and the Northern Lights are Finland’s main tourist attractions. In 2021, the European Commission allocated EUR60 million ($71 million) to develop innovative services and operate models as well as the tourism and travel sectors. According to the World Economic Forum, Travel and Tourism Development Index (2021), the country secured 18th rank among 117 nations. According to the World Travel and Tourism Council, in 2021, travel and tourism contributed 5.5% [EUR13.9 billion ($16.4 billion)] to the GDP and the sector created 186.9 thousands jobs, which is equivalent to 7.0% of total jobs. According to GlobalData, international arrivals in Finland recorded 3.3 million in 2019, which narrowed down to 0.9 million and 0.6 million in 2020 and 2021, respectively. Further, international arrivals in the country is forecast to reach 2.2 million in 2022 and 2.7 million in 2023 due to lifting of travel restrictions.
- Positive outlook of renewable energy: In October 2021, the country allocated EUR70 million ($82.8 million) for replacement of oil boilers with low-or zero-carbon heating systems and EUR40 million ($47.3 million) to support deployment of private and public charging points for electric cars, gas charging and refueling infrastructure. The objective of the investment is to contribute to Finland’s goal to achieve carbon neutrality by 2035. In 2021, wood fuels covered 30% of total energy consumption. Finland’s emission-free electricity generated by hydropower stood at 22% of the total share of electricity generation in 2021. In November 2021, the country anticipated to launch 455MW wind energy project with 1.3TWh of green power (a year) production capacity, which would meet needs of approximately 280,000 homes in Finland. The project is expected to be operational by 2025. In March 2022, the government announced a plan to launch a voluntary agreement to cut down on the country’s use of single-use plastic cups and certain food packets.
- Robust cybersecurity and policy to boost technology sector of the country: In October 2021, under Finland’s recovery and resilience plan, the European Commission allocated EUR50 million ($59.1 million) for the deployment of high-speed broadband infrastructure across the country. The plan also supports Digirail project to introduce the European Rail Traffic Management System on the entire national railway network by 2040 with EUR85 million ($100.5 million). The country received EUR100 million ($118.3 million) for digital innovation in social welfare and health care services, EUR47 million ($54.4 million) for continuous digital learning and EUR25 million ($29.6 million) to accelerate microelectronics, 6G, artificial intelligence and quantum computing. The regulation will be completed by August 2026. In April 2022, the government announced to allocate approximately between EUR40 million and EUR56 million ($47.3 million to $66.2 million) during the period of 2023–26 to improve cyber security of Finland.
GlobalData Country Risk Index (GCRI) – Q2 2022
Finland was ranked 10th out of 152 nations in the GCRI Q2 2022. The country’s risk score is in the low-risk nations band (30). Finland’s risk score across major PESTLE parameters as well as the overall risk score (22.5), were lower than the world average (44), but higher than the West-Europe region score of 26.1. The country secured low risk on macroeconomic (20.9), political environment (9.5), environment (11.2) technology and infrastructure (23.7), legal environment (28.3), compared to the World and the West-Europe region in Q2 2022.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from MarketLine. Western European countries in this publication include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, the Netherlands, Norway, Portugal, Ireland, Spain, Sweden, the UK, Luxembourg, Iceland, and Switzerland.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Finland
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