Orpo Government: Finnish economy growing and Government taking targeted measures to boost growth

Government's budget proposal for 2027
Orpo Government: Finnish economy growing and Government taking targeted measures to boost growth

On 1 September 2026, the Government of Prime Minister Petteri Orpo reached a decision on its budget proposal for 2027 and is steadily implementing the agenda it agreed at the spending limits session. The agenda includes EUR 100 million of investment in construction and numerous transport infrastructure projects. The Government's targeted measures will support economic growth.

"Economic growth increases confidence in the future. We hope that it will already have an impact this year and help more people in Finland find work. During this parliamentary term, we have made a significant number of decisions that strengthen Finland's competitiveness and improve the conditions for entrepreneurship, investment and growth. In the spring, we drew up a new agenda for ourselves, and we are now delivering on it," says Prime Minister Petteri Orpo.

Finland's economy and output are growing, and the outlook for businesses and households has brightened.

People in Finland have seen their purchasing power increase throughout this parliamentary term. Domestic demand will receive a boost next year from a EUR 230 million reduction in taxes on labour. The tax cut is aimed mainly at low and middle income earners.

The increase in the tax credit for household expenses agreed in the spring spending limits session, which will take effect retroactively this year, will continue in 2027. It will encourage people to purchase services that make everyday life easier, such as cleaning and care services.

The reduction in the corporate tax rate to 18 per cent, which supports self-employment and growth, will enter into force at the beginning of next year. The ability of start-ups and high-growth enterprises to attract and retain talent will improve when the taxation of employee stock options changes from the beginning of next year. The period for deducting business losses will be extended from the current 10 years to 25 years.

The Government plans to submit an urgent proposal to Parliament on reforming the Self-Employed Persons' Pensions Act. The reform would be based on a freedom of choice model as agreed in the spending limits session. The reform will improve the conditions for self-employment and particularly benefit low and middle income self-employed people and sole entrepreneurs.

Following the reform of the Self-Employed Persons' Pensions Act, the Government will launch a project to bring all self-employed people into the scope of the National Incomes Register and the Positive Credit Register. This will improve equality between self-employed people and make it possible to monitor incomes in real time in the pension system for self-employed people.

Stable and predictable economic policy supports growth

The Government is carrying on with previously agreed savings measures. In the 2027 budget, direct spending cuts will rise to EUR 4.8 billion. Decisions to curb indebtedness will be implemented to the tune of nearly EUR 1 billion next year. Savings will be targeted, among other areas, at central government administration.

The central government is expected to run a deficit of EUR 12.4 billion in 2027. The deficit is being widened particularly by debt interest payments and necessary investments in defence and security.

The government budget session included a discussion on the African swine fever situation in south-eastern Finland. The Government is prepared to combat the disease through new measures and additional financing in the supplementary budget.

Previously decided fiscal consolidation measures to be included in the national budget

In its spring spending limits session, the Government decided on savings totalling approximately EUR 540 million by the year 2030. These savings will replace individual previously decided savings from social and healthcare services, and measures that affected revenue. Public sector austerity measures will also finance investment and growth measures that were decided in the spending limits session. The savings decided in the spending limits session will total some EUR 390 million in 2027.

EUR 60 million of the savings decided in the spring will be additional savings on central government operating expenses in 2027. These savings have now been fully allocated in line with draft budgets of the ministries and Government policies. Additional savings of EUR 25 million that were decided in autumn 2025 have also been allocated. The total savings in operating expenditure will amount to some EUR 593 million in 2027.

Several other fiscal consolidation measures that were decided in autumn 2025 will be included in the national budget with a view to reducing the accumulation of public debt. For example, the authority to approve interest-subsidised loans for state-subsidised housing construction will be reduced by EUR 365 million, and environmentally and health-motivated taxation increased by a total of EUR 50 million in excise duties on tobacco and alcohol. The transfer from the State Pension Fund to cover pension expenditure will also be increased by some EUR 100 million.

Important transport infrastructure projects to be financed under the investment programme

In its spring spending limits discussion, the Government agreed on increasing the total amount of its fixed-term investment programme by EUR 0.2 billion to around EUR 4.7 billion. The Government also agreed on additional or new funding for several projects.

The budget proposal includes funding for the following projects that are part of the investment programme and were mostly outlined in the spring spending limits session:

• An increase of EUR 59 million to the authority for developing the Karelian railway (from EUR 90 million to EUR 149 million) and, in relation to the authority increase, an appropriation of EUR 17 million.
• EUR 8 million for improving main road 2 in Humppila.
• A budget authority of EUR 19 million and an appropriation of EUR 1 million for the widening of main road 8 between Bäckliden and Brännbacken.
• A budget authority of EUR 49 million for improving main road 9 at Ylämylly.
• An appropriation of EUR 7.3 million for the junction arrangement on main road 9 in the centre of Suonenjoki.
• A budget authority of EUR 14.5 million and an appropriation of EUR 1 million for the widening of main road 13 between Savitaipale and Lemi.
• EUR 6 million for improving the junction in Teppo and the Penttilä bridge on main road 19.
• EUR 4 million for intersections and railway underpass in Muhos on main road 22.
• An appropriation of EUR 4.8 million for the Heinävesi project on main road 23 between Rantala and Lajunlahti.
• An appropriation of EUR 6 million for the Kela junction project on main road 51.
• An appropriation of EUR 1 million for the improvement of highway 506 at the Karjalankatu junction in Juuka.
• A budget authority of EUR 6.75 million and an appropriation of EUR 0.9 million for the public transport deck project in Kupittaa.
• A budget authority of EUR 14.3 million and an appropriation of EUR 8 million for the renovation of railway and metro stations in Helsinki.
• A budget authority of EUR 18 million and an appropriation of EUR 6 million for the deepening of the Loviisa fairway.
• An appropriation of EUR 7.04 million for the planning of military mobility projects
• A budget authority of EUR 46 million and an appropriation of EUR 0.5 million for expanding the project of planning European track gauge rail links.
• An appropriation of EUR 3.6 million for the bypass project in Norvajärvi emergency landing strip.
• EUR 15 million for reducing the repair backlog of sports facilities and promoting equal opportunities to engage in sports in segregated residential areas.
• An increase of EUR 2 million is proposed for the Nousu and Helmi programmes to allocated to removing obstacles to migratory fish.

Investment programme appropriations for 2027 total EUR 878 million.

The expenditure under the investment programme over the coming years will not increase central government indebtedness after the end of the parliamentary term.

Taxation policy will encourage work and self-employment

The Government has boosted incentives for work and productivity by easing taxation of labour and reducing the highest marginal tax rates. The Government has also strengthened public finances in particular by increasing consumption taxes and shifting the focus away from taxation of labour towards consumption taxation.

The budget proposal for 2027:

• eases taxes on low and middle income earners by a total of EUR 230 million;
• makes index adjustments to earned income tax criteria at all income levels;
• shifts the taxation date of employee stock options with respect to shares in unlisted companies from the time of exercise to the time of transfer of the underlying asset;
• expands and increases the tax deduction for donations;
• increases the tax deduction for entrepreneurs.

In addition, certain changes will enter into force in 2026 that will have an impact on taxation in 2027. The changes will take effect retroactively from the beginning of 2026:

• The tax credit for household expenses will be increased for 2026 and 2027.
• The scope of sports and cultural vouchers will be expanded and the maximum amount of the benefit will be increased as of 2026.
• The increase of the commuting expenses deduction threshold for the 2026 tax year will reduce cash accruals for 2027.

The corporate tax rate will be lowered by two percentage points to 18 per cent. Tax revenue will also be reduced by the exemption from the interest deduction limit granted to infrastructure projects critical that are to security of supply.

The carbon dioxide component of the tax on transport fuels and the basic motor vehicle tax will also be lowered.

Gradual increases to the excise duty on tobacco products were agreed in the Government Programme, and the indexation of the excise duty on alcohol products was decided in the Government's mid-term policy review session. The abolition of the corporate tax exemption for Veikkaus Oy and the increase of the lottery tax in connection with the gambling system reform and will also boost tax revenue.

The Government has decided not to pursue the tax expenditure envisioned for data centres.

The Government will not implement the planned expansion of the waste tax. Insufficient uses were found for most of the waste fractions produced by the individual companies that had been proposed to be covered by the tax.

The Government will continue to look into a reform of real estate taxation but will not implement the reform this parliamentary term. The timetable would not give property owners sufficient time to study and prepare for the impact of changes. The results of the Government's work on the reform will be available to the next government.

Additional investment in defence and security

Russia's war of aggression against Ukraine has fundamentally changed the security environment of Finland. NATO membership is also affecting the needs of defence enhancement.

An increase of EUR 618 million over the Budget for 2026 is proposed in appropriations of the Ministry of Defence's branch of government. The budget proposal also includes EUR 1.3 billion in budget authorities for procurement of defence materiel. A procurement authority of EUR 186 million is proposed for the operational expenses of the Finnish Defence Forces.

To support Ukraine, an additional allocation of EUR 200 million is proposed for the Ministry of Defence's branch of government. In addition, EUR 3 million is proposed for the Ministry of the Interior's branch of government for Ukraine-related transport costs and procurement.

Approximately EUR 67 million is proposed for wellbeing services counties, the City of Helsinki and the HUS Group for investing in and maintaining the healthcare preparedness and readiness of the Finnish Defence Forces.

EUR 10 million is proposed for the Finnish Border Guard's UXV30 project, set up for the procurement and introduction of unmanned surveillance systems. The project is being funded almost entirely by the European Union.

Central government funding for research and development

The Government maintains its commitment to raising R&D funding to 1.2 per cent of GDP by the year 2030. Based on a decision made in autumn 2025, the R&D Funding Act will nevertheless be amended so that the increase in central government funding required to achieve this target is updated annually to match the latest forecast.

Under the budget proposal, total R&D funding will be approximately EUR 3.40 billion in 2027. This represents an increase of some EUR 230 million compared to 2026. The largest increases will concern Business Finland's R&D budget authority and the Research Council of Finland's research project budget authority.

Highlights from the budget proposal

• An additional appropriation of EUR 3 million is proposed for the courts and EUR 1 million for the National Prosecution Authority to safeguard the resources of judicial personnel.
• An inflation adjustment based on the cost-of-living index will be made to the minimum number of unit fines. This change is expected to increase the necessary prisoner capacity. A total of EUR 3.45 million is therefore proposed for the Prison and Probation Service of Finland and EUR 227,000 for prison healthcare to implement the change. The funding accounts for the expansion of substance abuse rehabilitation services within the Prison and Probation Service. Revenue from fines is expected to grow by approximately EUR 3.9 million.
• Funding for the police will be increased by EUR 1 million and for the Finnish Immigration Service by EUR 1 million to improve the efficiency of the implementation of returns. Additionally, the proposal includes EUR 1 million for the Prison and Probation Service of Finland to respond to increased prisoner numbers.
• A total of EUR 50 million is proposed for grants promoting the energy efficiency of residential buildings.
• A sum of EUR 25 million is proposed for fixed-term development projects that are coordinated by the wellbeing services counties and the City of Helsinki and implemented together with health and social services organisations. The funding will be used to develop the activities of regional health and social service organisations and support their work to promote health and wellbeing.
• EUR 40 million is proposed for the wellbeing services counties, the City of Helsinki and the HUS Group for fixed-term projects developing health and social services to enhance continuity of care, informal care, personal doctor models and services for children, young people and long-term homeless people, for example.
• A sum of EUR 10 million is proposed for central government compensation to universities to cover costs arising from the two-tier model of psychotherapy training.
• The proposal includes EUR 5 million of addition financing for METSO Forest Biodiversity Programme. EUR 4 million of this would be allocated to the Ministry of the Environment's branch of government and EUR 1 million to the Ministry of Agriculture and Forestry's branch.
• An increase of approximately EUR 2.68 million is proposed for funding shelter activities to increase the number of shelter places.
• An increase of around EUR 2.7 million is proposed for the new tasks assigned to healthcare and social welfare units that assist in investigating suspected offences involving children.
• A total of EUR 1.1 million is proposed as separate central government compensation to the wellbeing services county of Ostrobothnia to compensate the costs of the Finnish Centre for Client and Patient Safety.
• Approximately EUR 0.8 million is proposed for the funding of the UKK Institute.
• A non-recurring sum of EUR 2 million is proposed for a priority procedure for industrial permit processes.
• EUR 3.5 million in funding will be allocated to the Art Testers programme for the 2027/2028 academic year.
• EUR 1 million will be allocated to preparedness of local communities (the Kylävara project) and EUR 0.2 million to village shop support.
• EUR 0.5 million will be allocated to the organisation of Sami psychosocial support.
• EUR 1 million will be allocated to strengthening research infrastructure and the University of Vaasa and EUR 1 million to infrastructure projects in the Vaasa region.
• EUR 4 million will be allocated to transitional phase bridge funding for the equine industry due to the delay in the gambling reform.
• EUR 1.5 million is proposed for the renovation of highway 5640 between Niskakylä and Kattaalankylä.
• The EUR 4 million in funding for research on social work that was not used this year will be allocated to the Research Council of Finland in the supplementary budget proposal in 2026.
• The Government takes the African swine fever outbreak detected in Finland on 30 July 2026 seriously and will allocate sufficient resources to combatting and getting the outbreak under control. This resource allocation will be reviewed in the third supplementary budget proposal for 2026 and in the amendment to the budget proposal in 2027. The Government will raise the reward for samples collected from hunted wild boars to EUR 500 until the end of 2026.
• The Government is also preparing to respond to impacts from African swine fever on local livelihoods and the regional economy. These impacts will be assessed in the amendments to the budget proposal and in the first supplementary budget proposal for 2027.

Finland's economic outlook has improved

In the early part of the year, Finland's economic growth has been markedly stronger than expected. Output has expanded rapidly for three consecutive quarters. Prospects for both businesses and households have become more favourable. Investment will be supported by projects related to the energy transition, artificial intelligence and defence, while exports are expected to increase despite risks in the global economy.

Output growth should also support employment growth towards the end of the year. Although the housing market remains subdued, there is considerable pent-up demand, and the oversupply of housing is easing.

Uncertainty continues to restrain household consumption. However, improving consumer confidence, moderate wage development and tax cuts are supporting private consumption. The household saving rate has increased and, on average, households are also in a position to accommodate a swift rise in consumption.

Key budget figures

The budget proposal for 2027 totals EUR 92.5 billion. This is EUR 0.8 billion higher than the sum budgeted for 2026, including the second supplementary budget. The cost-saving impact of Government's budgetary austerity decisions will gather strength in 2027.

Expenditure will grow, in particular due to statutory and contractual index adjustments and rising interest expenses. Interest expenditure on central government debt is estimated at EUR 4.4 billion, which is EUR 1.2 billion more than budgeted for this year (including the second supplementary budget).

The budget proposal shows a deficit of EUR 12.4 billion. The estimated deficit is EUR 0.9 billion lower than the figure budgeted for 2026 (including the second supplementary budget). The non-recurring revenue recognition of around EUR 2.3 billion from the dissolution of the National Housing Fund, which has no impact on indebtedness, has been removed from the revenue for 2026.

The deficit has decreased by EUR 0.7 billion compared to the spring General Government Fiscal Plan. Estimated tax revenue has grown by EUR 0.8 billion compared to the spring estimates. The increase in tax revenue estimates is explained by higher than forecast tax revenue in 2026 and the update of the macroeconomic forecast. On the other hand, estimated interest expenditure has grown by EUR 0.3 billion compared to the spring general government fiscal plan.

Central government on-budget revenue, expenditure and balance, EUR billion

* The 2026 revenue figure in the table excludes roughly EUR 2.3 billion in non-recurring revenue recognition arising from dissolution of the National Housing Fund, which will have no impact on borrowing. As a result, the deficit provides a better picture of the borrowing needs budgeted for 2026.

	2026 budget + 2nd supplementary budget * (EUR bn)	2027 budget proposal
Revenue (excluding net borrowing)	78.3	80.1
Expenditure	91.7	92.5
Balance	-13.4	-12.4

Central government budget also impacts the funding of wellbeing services counties and municipalities

County finances

A total of EUR 27.6 billion is proposed for the universal funding of wellbeing services counties. This means an increase of approximately EUR 0.36 billion on the 2026 Budget. The growth is mainly explained by index increases in 2027 (2.71 per cent), which amount to roughly EUR 718 million. The estimated annual growth in the need for healthcare and social welfare services will have a financial impact of around EUR 248 million, but from 2027 onwards only 60 per cent of the growth will be taken into account. This reduces the funding by around EUR 61 million. An ex-post review of funding based on the 2025 financial statements of the counties will reduce funding by approximately EUR 395 million.

The funding also takes into account the amendments to the legislation on functions and client charges, which amounts to a net reduction of around EUR 185 million in the funding of the wellbeing services counties. The largest reduction (EUR -87.8 million) is due to new client charges. The increases include factors such as a growth in funding by EUR 6.1 million due to an amendment to the Disability Services Act.

Municipal finances

A total of EUR 3.4 billion is proposed for central government transfers to municipalities for basic public services, which represents a reduction of about EUR 110 million from the amount in the 2026 Budget. The amount of central government transfers will be reduced by factors such as an increase in the municipalities' share of funding for basic social assistance, which will reduce the appropriation level by around EUR 121 million relative to 2026, and by a revision of the division of costs between central government and municipalities in 2027, which will reduce central government transfers by around EUR 55 million. The index increase in central government transfers for basic public services in 2027 is 3.5 per cent, which will increase central government transfers by some EUR 114 million. The reduction of the corporate tax rate will be compensated to municipalities by adjusting their share of the tax revenue.

The increase in the index brake decided by the Government in the government spending limits discussion from 1 percentage point to 2.8 percentage points will reduce central government transfers by approximately EUR 91 million relative to the 2026 Budget. The reform of integration services brings funding for integration services together under a single item in central government transfers for basic public services. This will increase central government transfers by EUR 28 million. In addition, the adoption of the EUR 9.6 million employment support, which was one of the employment measures outlined in the government spending limits discussion, and EUR 7.3 million to compensate for the additional costs arising from adjusting the guarantee period for integration support will increase central government transfers. The new and broader functions will increase total central government transfers for basic public services by approximately EUR 41 million, of which approximately EUR 31 million will be transferred from other budgetary items.

Overall, the decisions made during the government term will strengthen municipal finances by about EUR 50 million in 2027.

Next steps in the preparation of the budget proposal for 2027

The 2027 budget proposal will be submitted to Parliament at a government plenary session on Monday 21 September and will then be published online at budjetti.vm.fi. The Ministry of Finance will also publish its autumn forecast on 21 September.

The budget proposal also includes the Government's assessment on compliance with EU and national fiscal rules. The Finnish Economic Policy Council made its first statutory assessment of the Government's response to the recommendations received by Finland in the EU excessive deficit procedure on 5 August 2026. The Government's next account to the EU on the measures taken to rectify Finland's excessive deficit in the Draft Budgetary Plan are due to be adopted on 1 October.

Inquiries: Matias Pajula, Special Adviser to the Prime Minister in Economic Affairs, tel. +358 295 161 731, Jussi Lindgren, Economic Policy Adviser to the Minister of Finance, tel. +358 295 530 514, Laura Ollila, Special Adviser to the Minister of Education in Economic Affairs, tel. +358 295 160 288, Sonja Falk, Special Adviser to the Minister of Agriculture and Forestry in Economic Affairs, tel. +358 295 162 024

The email addresses of the Finnish Government are in the format [email protected].