COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Finland Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Finland and delivering a Council opinion on the 2023 Stability Programme of Finland
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Finland, economic policy, economic recovery, economic reform, energy policy, fiscal policy, green economy, labour market, renewable energy, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 626 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report -  Finland Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Finland and delivering a Council opinion on the 2023 Stability Programme of Finland {COM(2023) 626 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

The Finnish economy slows down 
before an expected pick-up in the 
second half of 2023 

Following  a  swift  recovery  after  the 
COVID-19 pandemic, the Finnish economy 
entered  a  technical  recession  in  the 
second  half  of  2022.  Against 
the 
background  of  Russia’s  war  of  aggression 
against  Ukraine,  real  GDP  growth  for  the  last 
two  quarters  of  the  year  was  negative,  which 
qualifies  as  a  ‘technical  recession’.  However, 
real  annual  GDP  grew  by  2.1%  in  2022  (see 
Annex  20).  In  both  2021  and  2022,  growth 
was supported by domestic demand. Last year, 
a  build-up  of 
inventories  also  noticeably 
contributed  to  growth  (see  Graph  1.1).  The 
start  of  2023  has  been  marked  by  rather 
negative economic sentiment in industry, retail 
trade  and  construction.  Consumer  confidence 
has  also  been  low.  Inflationary  pressures, 
higher  interest  rates  and  tighter  financing 
conditions  are  set  to  weigh  on  economic 
performance  in  the  near  term.  However,  the 
external  environment  is  projected  to  improve, 
and economic activity is expected to pick up in 
the second half of 2023. 

Exports have remained relatively resilient 
after  the  start  of  Russia’s  war  of 
aggression  against  Ukraine.  In  2022,  the 
Finnish  exports  of  goods  to  Russia  accounted 
for 2.6% compared to 5.4% in 2021. According 
to  the  Finland  Chamber  of  Commerce (1),  in 
November 2022, only 4% of export companies 
had  business  in  Russia,  compared  to  24%  in 
May.  A  few  studies (2) (3)  found  that  larger 

(1)  Chamber of Commerce's export director survey - 

Suomikauppakamari 

(2)  https://datapilotti.fi/datahuone-sota-ukrainassa-

vaikuttanut-venajan-kauppaa-kayneisiin-
suomalaisyrityksiin-vain-vahan/  

Finnish  companies  had  not  been  seriously 
affected  by  the  suspension  of  their  trade 
relations  with  Russia.  Overall,  considerable 
nominal  growth  of  exports  to  other  EU 
countries  and  the  US  implies  that  a  share  of 
exporting  businesses  successfully  entered  or 
expanded  their  activities  in  other  markets.  At 
the  same  time,  at  the  end  of  2022,  imports 
from  Russia  were  approximately  80%  lower 
than  a  year  before  and  mostly  comprised 
nickel. 

Graph 1.1: Real GDP growth and contributions 

Source: European Commission 

Inflation  spiked  in  2022,  reaching  its 
in  the  fourth  quarter.  Annual 
peak 
Harmonised  Index  of  Consumer  Prices  (HICP) 
inflation  stood  at  a  record  7.2%  compared  to 
2.1%  in  2021.  Significant  jumps  in  gas  and 
electricity  prices  put  annual  energy  inflation 
above  30%  and  were  the  main  driver  behind 
the overall increase in the price level. However, 
in  2022,  inflation  remained  below that  of  the 
euro  area  level  due  to  the  country’s  limited 
dependency on gas and the coordinated wage 
bargaining  system.  As  wage  increases  agreed 
for  2023  remain  below  the  forecasted  HICP 
inflation,  real 
inflation, 
incomes  are  set  to  decline,  weighing  on 

in  particular  core 

(3)  War in Ukraine: Impact on Finnish companies trading 
with Russia – Follow-up report – datahuone.com 
(datapilotti.fi) 

2 

-4-202461516171819202122Net exportsInvestmentPriv. consumptionGov. consumptionInventoriesReal GDP (y-o-y%)pps.  
 
                                                 
  
                                                                        
consumer  spending  together  with  the  higher 
interest rates. 

Increased  public  spending  and  weaker 
growth  put  pressure  on  public  finances. 
After  falling  to  0.9%  of  GDP  in  2022,  due  to 
strong  revenue  performance,  nominal  GDP 
growth and the gradual withdrawal of COVID-
19  measures,  the  general  government  deficit 
is forecast to increase to 2.6% of GDP in 2023 
and  to  remain  at  that  level  in  2024.  These 
projections  take  into  account  the  additional 
defence  spending  announced  by  the  Finnish 
government  against  the  backdrop  of  Russia’s 
war  of  aggression  against  Ukraine,  and  the 
cost  of  providing  protection  to  people  fleeing 
Ukraine  as  well  as  measures  to  lessen  the 
effects of high energy prices. The debt-to-GDP 
ratio  is  set  to  rise  from  73.0%  in  2022  to 
73.9% in 2023 and 76.2% in 2024 (see Annex 
20). 

The labour market performs well, 
but structural challenges remain  

The  Finnish  labour  market  performed 
strongly  in  2022.  The  unemployment  rate 
fell  to  6.8  %  in  2022  compared  to  7.6%  in 
2020 and 2021. This is a historically low rate 
given  the  high  rate  of  joblessness  following 
the  2007-2008  financial  crisis:  only  in  2019 
was  unemployment  somewhat  lower,  before 
the  COVID-19  crisis.  At  the  same  time,  the 
overall  number  of  available  jobs  remained 
high:  although  the  number  of  vacancies 
declined  in  the  second  half  of  2022,  this 
points  to  significant  skills  mismatches  and 
labour shortages in some sectors (see Section 
'Further  priorities  ahead’  and  Annex  14).  The 
employment  rate  stood  at  78.6%  in  the  last 
quarter of 2022 (see Graph 1.2).  

Finland  continues  to  perform  well  across 
most dimensions of the Social Scoreboard 
accompanying  the  European  Pillar  of 
Social  Rights.  In  2022,  adult  participation  in 
learning  over  the  past  4  weeks  was  high  at 
25.2%, while, according to the latest available 
data  for  2021,  79%  of  the  population  aged 
16-74  had  basic  or  above  basic  digital  skills, 

one  of  the  highest  rates  in  the  EU  (see  also 
Annex  10).  The  country  also  continues  to 
perform  strongly  on  most  social  indicators 
(see Annex 14). However, self-reported unmet 
needs for medical care remain well above the 
EU average (4.4% vs 2% in 2021). 

Graph 1.2: Employment, activity and 
unemployment 

Source: Eurostat; Labour Force Survey 

Despite  favourable  social  developments, 
some groups in Finland are still in a weak 
labour  market  position.  The  disability 
employment  gap (4)  decreased 
to  19.0 
percentage  points (pps)  in  2022  and  youth 
unemployment fell by 2.9 pps to pre-pandemic 
levels (14.2% in 2022). However, the share of 
in  Finland  who  are 
non-EU-born  people 
unemployed  stood  at  13.7% 
in  2022, 
significantly above that of native-born (6.4%). 
the  gender  employment  gap 
Although 
remained  among  the  lowest  in  the  EU,  at  1.2 
pps  in  2022,  the  gender  pay  gap  (16.5%  in 
2021)  still  lies  above  Finland’s  Nordic  peers 
and the EU average. Recent research suggests 
that  child  home  care  benefits  may  negatively 
affect  the 
labour  market  participation  of 
women and undermine their career and salary 
prospects (5).  The  planned  social  security 
reform  is  aimed  at  addressing  the  issue  and, 
in the interim report released in March by the 
Social  Security  Committee,  several  proposals 
support  the  reconciliation  of  childcare  with 
integrating 
gainful 
labour 
the 
underrepresented  groups 

Better 
into 

employment. 

(4)  The difference of the employment rate of persons 

without disabilities and the employment rate of persons 
with disabilities. 

(5)  Paying Moms to Stay Home: Short and Long Run Effects 
on Parents and Children (doria.fi) ; New study: Effects of 
child home care allowance are negative - VATT Institute 
for Economic Research. 

3 

010203040506070809002468101214Employment rate 20-64 (rhs)Activity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)NEET rate 15-29 (lhs) 
  
                                                 
involved in international trade compared to the 
OECD average, which is also reflected in large 
productivity  differences  between  companies 
within the same sectors.  

Graph 1.3: Labour productivity 

market  will  be  key  for  Finland  in  reaching  its 
national employment rate target by 2030 (see 
Annex 14). 

skills 

shortages  pose 
Labour  and 
challenges  to  Finland’s  potential  for 
competitiveness  and  growth.  The  highest 
share of reported shortages is in the services, 
construction,  ICT  and  technology,  education 
and  health  and  social  care  sectors.  At  the 
same time, tertiary educational attainment for 
people  aged  25-34  stood  at  40.7%  in  2022 
and  is  below  the  EU  average  (42.0%).  Labour 
shortages in Finland will be further aggravated 
by  population  ageing,  relatively  low  regional 
labour mobility and a lower level of migration 
compared to its Nordic peers.  

Finland struggles with long-
standing productivity issues 

(1) Productivity level: GDP per hour worked in pps (index, 
EU-27=100); growth rates: annual growth of real GDP 
per hour worked. 
Source: European Commission (Ameco) 

in 

terms  of 

The  current  business  model  and  various 
structural  challenges  hinder  productivity 
growth. Finland is behind its Nordic peers and 
trade 
the  Baltic  countries 
openness,  i.e.  the  value  of  its  exports  (and 
imports)  compared  to  the  GDP,  while  in 
general  tradable  sectors  tend  to  be  more 
productive  (see  Annex  12).  Finland’s  trade 
openness  has  deteriorated  over  the  last  two 
decades  pointing  to  unfavourable  structural 
changes  in  the  economy.  These  are  mostly 
related  to  the  ICT  sector  contracting  and, 
consequently, a larger share of services where 
productivity tends to be lower. Other important 
industries  –  forestry,  metal  and  machinery  – 
also seem to have been losing export markets, 
in  terms  of  volumes  and  relative  prices. 
Furthermore,  some  studies  point  out  that  the 
quality  of  exports (6)  has  actually  decreased 
over  time (7) (8).  Moreover,  SMEs  are  less 

(6)  Quality could be explained by parameters such as 

product or service sophistication and required high tech 
and high skill intensity. The share of final goods versus 
raw or intermediate goods is also an indicator of export 
quality. 

(7)  Oinonen, Sami; Virén, Matti E. E. Why is Finland lagging 
behind in export growth? Bank of Finland Economics 
Review, No. 5/2022. 

(8)  Koski, H. and V. Kaitila (2021). Miksi vientimme Kiinaan 

muuttui raaka-ainevetoiseksi? (etla.fi)   

Labour  productivity  has  been  stagnating. 
Since  2008,  the  growth  of  labour  productivity 
was  well  below  the  EU  (weighted)  average. 
Consequently, 
labour  productivity  dropped 
substantially  compared  to  the  EU,  and  now 
stands  only  slightly  above  the  EU  aggregate 
(see  Graph  1.3).  This  is  tightly  linked  to  the 
negative  structural  changes  in  the  Finnish 
economy,  i.e.  more  people  are  now  employed 
in  sectors  which  generate  lower  value  added 
(mostly  services).  Labour  shortages  in  more 
productive  sectors,  e.g.  ICT,  and  the  lack  of 
shortages 
tertiary  graduates  and 
aggravate  the  problem  (see  Section  'Further 
priorities  ahead’).  Furthermore,  Finland  has  a 
rather  compressed  wage  distribution,  which 
means that differences in wages between low-
skilled  and  high-skilled  employees  are 
relatively  small.  This  implies  less  efficient 
labour  allocation  and  adds  pressure  on 
productivity (9).  On 
the 
coordinated  two-tier  wage  bargaining  system 
(and  previously,  the  Competitiveness  Pact) 
helped  to  keep  wage  growth  in  line  with 
sustain 
productivity 
competitiveness.  The  2022  agreement  on 
public  wages  in  the  municipal  sector  could 

the  other  hand, 

developments 

skill 

and 

(9)  IMF (2023), Finland: 2022 Article IV Consultation. 

4 

100102104106108110112114116118120122-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.020002003200620092012201520182021Index EU=100% changeLabour productivity growthLabour productivity growth EU-27Labour productivity (pps, index EU=100, rhs) 
                                                 
   
                                                 
somewhat  weaken  the  relatively  high  degree 
of wage coordination. 

There  have  been  no  major  improvements 
in  total  factor  productivity (10).  This  is 
partially  explained  by  lower  spending  on  R&D 
compared to the period before the 2007-2008 
great  financial  crisis  (see  Annex  11).  Finland 
aims to increase R&D spending to 4% of GDP 
(compared to actual spending of 3.0% of GDP 
in  2021  and  3.7%  in  2009).  Achieving  this 
requires  a  clear  commitment 
the 
government  concerning  public  investment  in 
R&D,  better  coordinating  support  between  the 
agencies  that  administer  grants  for  R&D,  and 
increasing  the  R&D  labour  force (11).  At  the 
same  time,  while  Finland  is  an  innovation 
leader in the EU based on the data on patent 
registration, businesses seem to be struggling 
with  commercialisation  of  their  new  products 
and services (12). 

from 

important 

It  is  still  important  for  Finland  to  focus 
on  investments  that  support  productivity 
growth,  also  in  light  of  a  rapidly  ageing 
society.  However,  in  Finland,  gross  fixed 
capital formation is tilted towards construction 
rather  than  investment  in  equipment  and 
intangibles  (e.g.  intellectual  property),  which 
for  productivity  growth. 
are 
Achieving  carbon  neutrality  also 
requires 
additional  investments,  which might  be  better 
labelled  as  those  driving  change  rather  than 
increasing efficiency.  In  addition,  compared to 
its  peers,  the  country  is  less  successful  in 
attracting  foreign  direct  investment,  which 
usually  supports  export  and  productivity 
growth. This could be partially explained by the 
high  level  of  taxation  overall  and  Finland’s 
geographical  position.  Addressing  the  above-
mentioned challenges requires several reforms 
(see  Section 
'Further  priorities  ahead’). 
Otherwise,  the  lower  potential  growth  and 
resulting  moderate  public  revenues  might 

(10)  A measure of productivity accounting for effects in total 
output not caused by traditionally measured inputs of 
labour and capital. 

(11)  OECD (2022), OECD Economic Surveys: Finland 2022, 

OECD Publishing, Paris, 
https://doi.org/10.1787/516252a7-en  

(12)  Finnish Productivity Board (2022). Wages and 

Competitiveness Depend on Productivity. How Can We 
Foster Productivity Growth? 

make  it  challenging  for  a  country  with  an 
ageing 
the  proper 
to  ensure 
functioning of the welfare state. 

society 

Ageing remains a challenge for the 
economy and public finances 

The  projected  rapid  ageing  is  a  major 
societal  and  economic challenge.  Finland’s 
fertility rate has declined sharply and is in the 
lower  half  of 
ranking.  Recent 
the  EU 
studies (13)  point  to  an  increased  lifetime 
childlessness,  especially  among  those  with 
medium  and  low  levels  of  education.  Net 
migration  is  also  relatively  low,  though  the 
authorities  are  seeking  to  at  least  double  the 
current volume of work-based immigration by 
2030 (14).  However,  the  slow  processing  of 
applications 
the 
immigration  services  have  been  a  recurrent 
issue,  and  it  has  been  reflected  upon  in  the 
Finnish  recovery  and  resilience  plan  (RRP).  At 
the  same  time,  the  OECD  pointed  to  broader 
challenges 
integration 
system (15).  

for  work  permits  by 

the  migrant 

for 

In 

is 

to 

projected 

the  2010s, 

The share of the workforce in the Finnish 
population 
shrink 
considerably.  According  to  Statistics  Finland, 
the working age population reached its peak in 
2009. 
the  working  age 
population  shrank  by  136 000  people  (3.8%) 
and by 2040 it is expected to have shrunk by 
another 76 000 people. Additionally, there are 
significant regional differences in demographic 
dynamics 
is 
concentrated  in  the  capital  region  while  some 
regions  are  experiencing  depopulation  (see 
Annex  17).  According  to  the  2021  Ageing 
Report  of  the  European  Commission,  the  old-
age dependency ratio (the ratio of people over 
65  to people  of  working  age,  i.e.  20-64  years 

population 

growth 

as 

(13)  The highly educated often have two children — 

childlessness and high numbers of children more 
commonly seen among low- and medium-educated 
persons - Flux Consortium 

(14)  Roadmap for Education-based and Work-based 
Immigration 2035 - Valto (valtioneuvosto.fi) 

(15)  https://www.oecd.org/els/mig/Finding-the-Way-

Finland.pdf  

5 

 
                                                 
                                                 
old) in Finland is among the highest in the EU, 
at  38.9  people  aged  65  or  older  per  100 
people aged 20 to 64. This ratio is projected to 
be higher than in its Nordic peers over the next 
decades. Between 2019 and 2030, the old-age 
dependency  ratio  is  projected  to  reach  46.8. 
The  availability  of  sufficiently  skilled  labour 
force will therefore be a key issue for Finland. 
This  will  place  particular  demands  on 
developments  in  the  labour  market,  on  the 
education 
system  and  on  work-based 
immigration. 

long-term 

care  and 

the  ageing  society 

The  cost  of  ageing  weighs  on  long-term 
fiscal  sustainability.  The  ageing  of  the 
population  puts  a  structural  burden  on  public 
finances, largely related to the costs of health 
pensions (16). 
and 
According to the 2021 Ageing Report, the total 
cost of ageing is projected to rise from 26.5% 
of  GDP  in  2019  to  close  to  28%  of  GDP  in 
2030. Beyond the need for the welfare system 
to  care  for  the  growing  number  of  older 
raises  other 
people, 
economic challenges, such as the employment 
rate for older people. Despite a recent positive 
trend,  Finland’s  employment  rate  for  people 
close  to  retirement is  lower  than  in  its  Nordic 
peers. For people aged 60-64, the employment 
rate  of  56%  is  almost  5  pps  lower  than  in 
Denmark  and  over  10  pps  lower  than  in 
Sweden. The lower employment rate for older 
people  may  be  partly  due  to  the  fact  that 
Finland  has  had  several  pathways  to  early 
retirement  in  the  past,  i.e.  unemployment 
benefits,  unemployment  pension,  disability 
pension  and  early  retirement  pension.  Finland 
recently  reformed  its  pension  system  (2017) 
and  phased  out  early  retirement  pathways, 
leaving in place only disability pension, partial 
old-age pension  and  years-of-service  pension. 
Furthermore,  the  government  has  decided  on 
some  measures  to  increase  the  employment 
rate of people aged over 55. 

(16)  The Ministry of Finance has estimated that without a 
change in economic policy the cost of ageing will lead 
to the share of government debt to GDP exceeding 
100% in 15 years: Uudistuva ja kestävä Suomi : 
Valtiovarainministeriön virkamiespuheenvuoro 2022 - 
Valto (valtioneuvosto.fi). 

6 

The financial sector is sound, but 
household indebtedness is high 
and interest rates are rising 

The  banking  sector  remains  sound  and 
resilient,  but  there  are  vulnerabilities. 
Domestic  lenders  are  sufficiently  capitalised 
and  provide  a  solid  foundation  for  financing 
the  Finnish  economy.  The  non-performing 
loans  ratio  is  low  and  on  a  decreasing  trend. 
Despite  the  overall  positive  performance  of 
Finland’s  banking  sector,  there  are  some 
structural  vulnerabilities,  including  the  above-
average reliance on wholesale funding and the 
high level of household debt. Risks to financial 
stability  remain  limited,  despite  significant 
cross-border  exposures,  especially  with  other 
Nordic  and  Baltic  neighbours.  There  are  no 
direct exposures to Russia, Ukraine or Belarus. 
The  banking  sector  is  heavily  exposed  to  real 
estate,  and  the  borrowers’  debt-to-income 
ratio  is  one  of  the  highest  in  the  EU.  Risks 
present in the housing market may affect the 
banking  sector,  as  both  households  and 
professional  investors  finance  a  significant 
share  of  their  real  estate  transactions  with 
debt (see also Annex 18). 

Housing  market  developments  are  of 
limited  concern  overall.  Finnish  households 
are heavily in debt and the household debt-to-
GDP  ratio  remains  above  both  prudential  and 
fundamentals-based  benchmarks,  with  about 
three  quarters  of  their  debt  being  mortgage 
debt.  While  the  household  indebtedness  ratio 
remained  broadly  stable 
in  2022,  and 
associated  risks  appear  to  be  limited,  almost 
all housing loans are at variable interest rates, 
which  exposes  households 
rising 
interest  rates.  The  rising  mortgage  interest 
rates  have  dampened  the  Finnish  property 
market, both residential and commercial. Year-
on-year  growth  in  house  prices  slowed  from 
4.5% at the end of 2021 to 1% in mid-2022.  
in  mortgage 
However,  a  temporary  drop 
lending  will  not  solve  the  issue  of  household 
debt.  Although  household  debt  risks  are 
lessened by the overall resilience of household 
be 
they 
balance 
underestimated  in  an  environment  with  rising 
interest  rates.  The  Finnish  authorities  have 

sheets, 

should 

not 

the 

to 

 
                                                 
taken  steps  to  address  these  vulnerabilities, 
including 
and 
macroprudential measures. 

legislation 

through 

Finland is making progress with its 
ambitious green agenda 

into  force 

Finland  has  adopted  the  most  ambitious 
climate  target  in  the  EU.  The  new  Climate 
in  2022, 
Act,  which  entered 
enshrines  Finland's  carbon-neutrality  target 
for 2035 into law. Finland's planned phase-out 
of  coal  use  in  energy  by  2029  is  on  track. 
However,  achieving  Finland's  climate  targets 
will require continued policy efforts and major 
public  and  private  sector  investment.  Due  in 
part  to  cold  weather  and  long  distances, 
Finland's economy is one of the most energy-
intensive in the EU (see Annexes 5 and 9). The 
main  emitting  sectors  of  energy,  industry, 
transport  and  buildings  will  all  need  to  help 
reduce  Finland's  greenhouse  gas  emissions. 
Major  bottlenecks 
renewable  energy 
for 
investments include lengthy permit and spatial 
planning  procedures,  though  a  time-limited 
fast-track  procedure  for  environmental  and 
water permits entered into force for the period 
2023-2026.  

in 

Finland’s  share  of  renewables 
its 
energy  mix  is  the  second  highest  in  the 
EU.  In  2021,  the  share  of  renewables  in 
Finland’s energy mix was 46%, while the share 
of  renewables  in  the  electricity  mix  was  even 
higher  at  54%.  Renewable  energy  investment 
demand  is  booming  as  also  evidenced  by  the 
successful  calls  for  applications  for  new 
energy technologies and energy infrastructure 
launched by the Finnish authorities as part of 
the  RRP.  Additional  renewables  capacity  is 
expected  to  be  added  in  the  coming  years, 
mainly  in  (offshore)  wind  power  and  in  other 
renewable  energy  sources 
including  solar. 
Diversification  away  from  Russian  energy 
imports  has  progressed  well:  before  February 
2022,  approximately  60%  of  Finland’s  energy 
imports  came  from  Russia,  while  by  March 
2023,  the  Treasury  reported  that  almost  all 
energy  flows  from  Russia  to  Finland  had 

stopped (17).  Moreover,  natural  gas  only 
accounts  for  6%  of  Finland’s  energy  mix, 
which has limited the country’s dependency on 
Russia  from  the  outset.  In  terms  of  energy 
infrastructure, a challenge is presented by the 
fact that a major share of renewable energy is 
generated  in  different  regions  from  where 
most consumption takes place. 

Finland’s  building  stock 
is  relatively 
energy-efficient  compared  to  the  EU 
average,  but  fossil  fuels  are  still 
prominently  used  for  heating.  Finland  is 
planning  to  phase  out  fossil-oil  heating  by 
2030, but the publication of the corresponding 
action plan has been delayed until the autumn 
of  2023.  The  public  budget  available  for 
replacing  fossil-oil  domestic  heating  was 
increased  by  EUR  40  million  in  2022 (18), 
though shortages of skilled labour and supply 
chain  issues  may  cause  delays  in  replacing 
fossil-oil heating systems.  

United 

Overall,  Finland  performs  very  well  on 
the 
Sustainable 
Nations’ 
Development Goals (SDGs). It performs well 
on all four dimensions of sustainability (Annex 
including  environmental  sustainability, 
1), 
fairness,  productivity  and  macroeconomic 
stability.  Finland  performs  above  the  EU 
average  on  12  out  of  the  16  SDGs  for  which 
sufficient  data  exists.  However,  it  is  moving 
away from the targets associated with SDG 2 
(Zero  hunger),  SDG  11  (Sustainable  cities  and 
communities)  and  SDG  15  (Life  on  land). 
Finland  is  making  progress  on  three  SDGs 
where it performs below the EU average: SDG 
7  (Affordable  and  clean  energy),  SDG  12 
(Responsible consumption and production) and 
SDG 14 (Life below water). 

(17)  Republic of Finland, State Treasury: ‘2022 Debt 

Management Annual Review’;  
https://www.treasuryfinland.fi/annualreview2022/the-
finnish-ruxit-decoupling-from-russian-energy-speeds-
up-energy-transition/ 

(18)  https://ym.fi/-/fossiilisen-lammityksen-vaihtajia-

tuetaan-40-lisamiljoonalla-ely-keskuksen-avustus-
laajenee-syksylla-maakaasulammityksen-vaihtajiin 

7 

 
 
                                                 
Box 1: 

Energy policy response in Finland 

Finland has adopted several support measures to cushion the impact of energy-price inflation 
on  households  and  businesses.  The  Commission  2023  Spring  Forecast  projects  the  country’s 
gross  budgetary  costs  to  amount  to  0.3%  of  GDP in  2023 (19).  Most  measures  do  not  fully 
preserve the price signal and are not targeted to the most vulnerable.  

Some  of  the  measures  reduced  government  revenue,  such  as  a  fixed-term  tax  credit  for 
electricity  and  a  temporary  lowering  of  the  VAT  on  electricity  to  10%  (between  December 
2022 and April 2023), while others increased expenditure, such as temporary financial support 
for  electricity  for  households  and  supplementary  child  benefit.  It  has  been  announced  that 
some of the measures are to expire in 2023, while others by the end of 2024. 

Finland  applies  the  EU  solidarity  contribution 
2022/1854 (20).  

in 

line  with  Council  Regulation  (EU) 

On security of energy supply, Finland has introduced an energy saving campaign from autumn 
2022 in addition to targeted energy efficiency programmes, providing more funding for energy 
renovations  and  electric  vehicle  recharging  stations.  A  floating  liquefied  natural  gas  terminal 
was procured and has been made available on a long-term basis since winter 2022.   

(19)  For 2022, gross budgetary costs of measures amounted 
to 0.1% of GDP. Some of the measures outlined in this 
box were already in place in 2022. 

(20)  I.e. the application of a mandatory temporary solidarity 

contribution at a rate of at least 33% to the 
extraordinary and unexpected profits of businesses 
active in the extraction of crude petroleum, natural gas, 
coal, and refinery sectors. It is calculated on taxable 
profits, as determined under national tax rules in the 
fiscal year starting in 2022 and/or in 2023, which are 
above a 20% increase of the average yearly taxable 
profits in 2018-2021. 

8 

 
 
 
 
 
 
                                                 
 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

to 

Finland’s  recovery  and  resilience  plan 
(RRP) aims to address the key challenges 
related 
the  green  and  digital 
transition,  labour  market,  education  and 
skills, 
and 
healthcare. It consists of 18 reforms and 37 
investments  that  are  supported  by  EUR  1.82 
billion in grants representing 0.7% of GDP (see 
Annex 3 for more details). 

competitiveness 

R&I, 

between 

the  achievement  of 

The implementation of Finland’s recovery 
and resilience plan is underway. While the 
implementation  in  general  is  on  track,  the 
Operational  Arrangements 
the 
Commission and Finland have not been signed 
yet  and  no  payment  requests  have  been 
submitted  under  the  RRP,  which  points  to  the 
need  for  efforts  to  catch  up  with  the  agreed 
payment request schedule. Therefore, a formal 
assessment  of 
the 
milestones  and  targets  for  2021  and  2022 
has yet to be completed. Finland submitted an 
amendment of its plan in January 2023 which 
was  approved  by  the  Council  on  14  March 
2023.  This  amendment  was  done  in  the 
context  of  the  update  of  the  maximum 
financial  contribution  available  for  Member 
States  under  the  Recovery  and  Resilience 
Facility. The allocation for Finland was reduced 
by EUR 263 million in June 2022. As a result, 
the funding was reduced proportionally across 
the  four  pillars  of  the  plan.  To  cater  for  the 
funding 
another 
amendment  to  the  RRP  is  planned  in  2023. 
The  following,  more  detailed 
review  of 
measures being implemented under the RRP in 
no way implies formal Commission approval or 
rejection of any payment requests. 

REPowerEU (21), 

under 

(21)  Also see Annex 4. 

9 

On the path to carbon neutrality  

the 

Finland’s  RRP 
country's 
takes 
ambitious  2035  carbon-neutrality  target 
as  a  starting  point.  Half  of  the  plan’s 
financial  allocation  is  dedicated  to  the  green 
transition.  

and 

transport 

The plan includes reforms and investment 
measures  to  reduce  carbon  emissions  in 
the four major emitting sectors – energy, 
buildings. 
industry, 
Measures  include  boosting  the  generation  of 
renewable  energy,  decarbonising 
industry, 
from  buildings  and 
reducing  emissions 
promoting  low-  and  zero-emission  forms  of 
transport.  Other  measures  target  emissions 
reduction, 
the 
development  of  new  technologies  in  sectors 
relevant to the green transition. 

skills  development  and 

in 

the 

first 

included 

The new Climate Act entered into force in 
the  2035  carbon-
2022,  anchoring 
neutrality  target  into  law.  The  investment 
programmes 
two 
components  of  the  RRP  to  boost  renewable 
energy technologies and related infrastructure 
have  been  launched.  In  addition,  to  expand 
infrastructure  for  low-carbon  vehicles,  the 
calls  for  the  installation  of  electric  vehicle 
chargers  and  hydrogen  refuelling  stations 
were  launched  and  selection  of  successful 
applicants has taken place. 

Increasing competitiveness 
through digital and green 
transitions, research & innovation 

The plan includes substantial investments 
research, 
promoting 
digitalisation, 
(RDI). 
development 

innovation 

and 

 
 
                                                 
Measures help strengthen RDI intensity, raising 
the share of national RDI expenditure to 4% of 
GDP  by  2030  and  increasing  the  ambition 
level of RDI activities, in line with the National 
Roadmap  for  RDI  adopted  in  spring  2020.  In 
2021  and  2022,  Business  Finland  and  the 
Academy  of  Finland  allocated  funding  to 
leading  companies,  SMEs,  and 
local  and 
regional research infrastructures through calls 
that promote green transition and investments 
in  R&I  infrastructure  for  sustainable  growth 
and digitalisation. The selected projects will be 
completed by the end of 2025.   

Promoting  the  digital  transition  is  a 
cross-cutting  theme  across  the  plan. 
digital 
Specific  measures 
infrastructure,  accelerating  digital  and  data 
economy  and  digital  security  (also  see  Annex 
13).  

focus 

on 

Regarding  the  digital  infrastructure,  the 
Digirail  project  aims  to  digitalise  rail 
transport.  The  test  laboratory  was  set  up  in 
2022.  Furthermore,  a  new  broadband  aid 
programme  was  launched  in  2022  when  the 
new  Act  on  Broadband  Construction  Aid 
entered  into  force  and  first  applications  were 
approved.  

and 

Several  major  ongoing  projects  are 
accelerating the digital economy. Finland’s 
real-time  economy  (RTE)  programme  aims  to 
promote the digitalisation of companies and to 
improve  their  day-to-day  management  and 
enable  the  transfer  of  electronic  documents 
(financial  statements,  procurement  messages, 
e-invoices 
The 
digital 
programme  has  already  increased  the  use  of 
e-invoicing  in  companies  and  municipalities 
with  an  extensive  e-invoicing  campaign.  Also, 
further  development  of  the  residential  and 
commercial  property 
information  system 
started in 2021. This information will also help 
develop  the  positive  credit  register,  for  which 
the  related  legal  act  entered  into  force  in 
August 2022. 

receipts). 

Addressing challenges related to 
labour market, skills development 
and healthcare  

and 

therefore 

relatively 

The  RRP  includes  measures  to  address 
challenges related to labour shortages in 
high 
sectors 
key 
unemployment, 
helping 
implement  the  European  Pillar  of  Social 
Rights.  A  key  measure,  the  Nordic  Model  of 
Employment  Services,  was  launched  in  May 
2022.  It  requires people who  are  unemployed 
do more active job searches on the one hand, 
and  the  employment  services  to  have  more 
frequent and personal contact with jobseekers 
on  the  other.  In  2022,  the  law  on  setting  up 
the intermediate labour market operator came 
into force. This public company is tasked with 
helping  people  with  partial  work  ability  find 
employment.  Furthermore,  the  phasing  out  of 
the 
(the  right  to 
additional  days  of  unemployment  security  for 
those  close  to  the  retirement  age)  between 
2023  and  2025  will  help 
the 
available  workforce.  The  law  came  into  force 
in  the  beginning  of  2023  and  is  expected  to 
yield the employment of 8 300 people by the 
end  of  2029.  To  attract  foreign  talent  and 
address  skills  and  labour  shortages  in  certain 
sectors, the plan supports streamlining permit 
procedures  for  work  and  education  visas.  A 
fast track was launched in June 2022, offering 
a  pledge  to  provide  resident  permits  for 
specialists,  growth  entrepreneurs  and  their 
families  in  14  days.  The  plan  also  supports 
increasing  the  staff  in  Ohjaamo  One  Stop 
centres for young people to help increase their 
offer of education, health and social services.  

‘unemployment  tunnel’ 

increase 

In  the  social  and  healthcare  area,  the 
plan aims to improve resilience and equal 
access  to  services,  while  making  the 
system more cost-effective. The plan helps 
reform  healthcare  and  social  services  by  
reorganising  their  provision  at  regional  level 
through  the  establishment  of  22 (22)  well-
new 
being 

counties. 

services 

The 

(22)  21 well-being services counties and the City of Helsinki, 
responsible for organising health, social and rescue 
services within its own area. 

10 

 
                                                 
Box 2: 

List of key deliverables under the RRP in 2023-2024 

  Award of grants for energy, energy infrastructure and industry decarbonisation projects 

  Publication of the action plan for phasing out fossil oil heating 

  At least 6 400 more dwellings have gained access to high-speed broadband (100/100 Mbit/s)  

  Exchange of digital business information in structured form is fully operational (as part of the 

development of real-time economy) 

  Digital platform for civilian cybersecurity training is publicly available 

  Award of grants for selected projects promoting research, development and innovation 

  Creation  of  at  least  600  study  places  at  post-secondary  level,  targeted  at  sectors 

experiencing labour shortages 

  Participation  of  at  least  7 800  people  in  training  programmes  to  respond  to  changes  in 

working life 

 

Increasing the number of job search interviews from 1 000 000 to 2 000 000 per year 

  Operationalisation of the intermediate labour market operator  

  Expansion  of  programmes  enhancing  mental  health  and  ability  to  work  to  new  regions,  

workplaces and occupational healthcare units  

in  working 

life.  Support 

levels  of  skill,  as  well  as  matching  the  labour 
market’s  needs.  At  least  7 800  people  will 
participate in training programmes to respond 
is 
to  changes 
envisaged  for  developing  green  and  digital 
skills  projects  and  training  courses  for  career 
counsellors.  At  least  600  study  places  will  be 
created  at  post-secondary  level,  targeted  at 
sectors experiencing labour shortages, such as 
health  and 
education, 
technology and ICT. 

long-term 

care, 

further  accumulated  during 

administrative  structure  was  completed  in 
2022. In January 2023, the provision of health 
and  social  services  was  transferred  from  the 
municipalities  to  these  counties.  The  related 
investments  aim  to  gradually  reduce  the 
delays 
the 
pandemic and help implement the ‘7-day care 
guarantee’  which  mandates  access  to  non-
urgent  care  no  later  than  7  days  after  the 
initial assessment of need for care. The law on 
the  7-day  care  guarantee  was  passed  in 
into  force 
January  2023  and  will  come 
gradually,  with  full  implementation  envisaged 
for  November  2024.  Finland  aims  to  help 
achieve  this  target  by  means  of  better 
availability  and  use  of  digital  services.  The 
plan  also  includes  measures  to  enhance  the 
knowledge base of health and social  services, 
in  order  to  improve  the  cost  effectiveness  of 
the  system,  and  to  address  the  risks  to  the 
sustainability  of  the  social  and  healthcare 
system posed by the ageing population.  

related  measures  contribute 

The  plan  also  supports  expanding  the 
education  and  skills  of  the  labour  force. 
The 
the 
to 
learning, 
reform  of  continuous 
ongoing 
supporting,  in  particular,  the  green  and  digital 
transitions, under-represented groups with low 

11 

 
 
 
 
 
FURTHER PRIORITIES AHEAD 

Beyond  the  challenges  addressed  by  the 
RRP, Finland faces further challenges not 
sufficiently  covered  in  the  plan.  Some 
measures were introduced recently (see Annex 
2  on  progress  on  CSRs),  but  more  action  is 
needed,  particularly  on  strengthening  public 
finances,  access  to  healthcare  and  long-term 
care  services  and  the  shortage  of  skills  and 
workers.  Moreover,  the  social  security  system 
needs  to  be  redesigned  to  address  some  of 
Finland’s  key  social  and  economic  challenges. 
In addition, the government’s ambitious green 
targets  call  for  more  investment  in  several 
sectors, also taking into account the relatively 
small  size  of  the  financial  allocation  for 
Finland  under 
(0.7%  of  GDP). 
Addressing  these  challenges  will  also  help 
Finland make further progress in achieving the 
SDGs  related  to  good  health  and  well-being, 
affordable  and  clean  energy,  climate  action, 
and decent work and economic growth. 

the  RRF 

Finland’s public finances need 
strengthening 

increase  revenues 

The weaker outlook for public finances in 
Finland,  coupled  with  slower  economic 
growth,  points  to  the  need  to  contain 
spending  and 
(see 
Annex  19).  The  current  structure  of  Finland’s 
general  government  finances  was  set  when 
the country had more favourable demographic 
and  economic  conditions.  However,  in  the 
future, the public sector’s financing base might 
not  be  sufficient  to  ensure  the  appropriate 
funding  of  public  services,  especially  in  the 
medium  to  long  term  (see  Annex  21).  The 
outlook  review  by  the  Ministry  of  Finance, 
published  in  December  2022,  stated  that 
significant  spending  and  revenue  adjustments 
are  needed  –  at  least  EUR  9  billion  over  the 
next two four-year parliamentary terms, to put 
general  government  finances  back  on  a 

sustainable  path.  In  this  context,  in  March 
2023 (23), the Ministry of Finance published an 
expenditure and structural review, as well as a 
tax survey, proposing a broad set of measures 
for the government to consider after the April 
2023  parliamentary  elections.  Conducting 
regular  spending  and  structural  reviews,  as 
well as tax expenditure reviews, could provide 
useful  policy  options  for  consolidating  public 
finances (24).  These  could,  for  example,  help 
ensure cost efficiency when implementing the 
health and social services reform and increase 
public  revenues  by  phasing  out  reduced  VAT 
rates  and  revising  excise  duties  and  energy 
and transport taxation.   

Re-engineering of the social 
security system needs to continue 

Finland  has  an  effective  and  inclusive  social 
welfare  system  with  a  high  level  of  social 
protection, but it is complex and includes some 
incentive traps. After a slight rise in 2020, the 
share  of  people  at  risk  of  poverty  or  social 
exclusion  (AROPE)  decreased  to  a  record  low 
level  of  14.2%  in  2021.  Spending  on  social 
protection  is  among  the  highest  in  the  EU  at 
24.6%  of  GDP  (2021),  which  makes  Finland 
less  vulnerable  overall 
regarding  social 
inequalities (see Annex 5). The impact of social 
benefits in reducing poverty reached 57.6% in 
2021.  However,  the  system  is  complex  for 
lawmakers,  implementing  organisations  and 
beneficiaries alike. There is a large number of 

(23)  Expenditure and structural survey (in Finnish), Tax 
survey (in Finnish), Outlook review by Ministry of 
Finance officials 2022 "An innovative and sustainable 
Finland" (in Finnish).  

(24)  Designing and implementing a regular spending review 
process is partly supported through a project funded by 
the EU via the Technical Support Instrument, managed 
by the European Commission Directorate General for 
Structural Reform Support – DG REFORM. 

12 

 
 
                                                 
benefits, which are based on differing criteria, 
granted  through  differing  procedures  and 
disbursed  at  different  times.  Furthermore, the 
delivery  of  services  is  fragmented  to  various 
organisations  and  authorities.  Allowing  more 
flexibility 
to  combine  different  benefits, 
services  and  work  income  would  increase 
incentives  for  beneficiaries  to  take  up  work. 
Finland  has  taken  steps  to  address  these 
issues,  including  by  implementing  the  income 
registry  in  2019  to  reduce  bureaucratic  traps. 
More  employment  measures  have  been 
incentives  for  the 
introduced  to  provide 
inactive  to  take  up  work  including  measures 
for  people  aged  over  55,  which  have  been 
effective since January 2023.   

(2020-2027)  was 

The  RRP  recalls  the  commitment  of  the 
authorities to pursue the social security reform. 
A  parliamentary  committee  with  a  7-year 
tasked  with 
mandate 
preparing  the  plan  for  a  long-term  structural 
and  operational  reform  of  the  social  security 
system  as  a  whole.  The  Social  Security 
Committee representatives are from all parties 
in  Parliament.  In  addition,  the  committee  has 
permanent  external  experts  as  well  as 
representatives  from  the  labour  market  and 
business  interest  groups.  In  its  first  years,  it 
produced  several  studies  to  identify  the  main 
problems of the current social security system. 
An interim report released in March 2023, just 
before  the  end  of  the  parliamentary  term, 
called for harmonising and consolidating some 
existing benefits into one basic social security 
benefit as the next step in the reform process. 
The  report  also  proposes  several  further 
studies  to  explore  the  issues  in  more  depth. 
The  planned  reform  of  the  current  system  is 
increase 
expected 
efficiency  and  allow  for  more  flexibility  to 
increase  the  incentives  for  beneficiaries  to 
take up work.  

reduce  complexity, 

to 

Labour and skills shortages are 
becoming increasingly acute 

Labour  and  skills  shortages  are  among 
the  key  economic  challenges  Finland 
needs 
Finland’s 
unemployment  rate  has  recently  remained 

address.  While 

to 

of 

Finnish 

increased 

Federation 

vacancies  has 

(Technology  Finland),  at 

slightly  above the  EU  average,  the  number  of 
rapidly, 
open 
reflecting  skills  mismatches  and 
labour 
shortages, as well as an increase in part-time 
in  many  sectors, 
employment  contracts, 
including scientific and technical activities, ICT, 
healthcare  and  social  services.  According  to 
Technology 
the 
least 
Industries 
130 000  new  ICT  specialists  are  needed,  due 
to  the 
increasing  demand  resulting  from 
innovation  and  digitalisation  of  companies.  In 
the second half of 2022, 44% of employers in 
the  services  sector  and  39%  of  employers  in 
construction  reported  that  labour  shortages 
limiting  their  activities (25). 
were  a  factor 
Addressing  skills  shortages  with  reskilling  and 
upskilling  policies  will  help  Finland  reach  its 
national  2030  target  on  adult  participation  in 
learning.  

i) 

the  green  and  digital 

Easing  labour  and  skills  shortages  will 
require efforts to be stepped up. Measures 
to  improve  the  attractiveness  of  professions 
experiencing  severe  shortages  would  be 
warranted  by  means  of 
large-scale 
investment  in  upskilling  and  reskilling  as  part 
transitions, 
of 
and   ii) attracting  foreign  workers  (also  taking 
into  account  the  lower  employment  rate  of 
foreign-born  women  when  compared  to  other 
groups)  through  the  ongoing  ‘Talent  Boost’ 
programme  (which  targets  skilled  people  that 
want  to  work  in  Finland,  and  also  focuses  on 
attracting  international  students).  In  parallel, 
the  planned  reform  of  the  social  security 
system  should  aim  to  improve  the  incentives 
to take up work. This should also help Finland 
reach  its  national  target  on  poverty  reduction 
by  2030  (see  Annex  14).  The  labour  market 
and  the  economy  at  large  would  further 
benefit 
to  get  under-
represented  groups  into  work  or  training.  The 
large  difference  –  12  percentage  points  in 
2022  –  between  the  employment  rates  of 
foreign-born  and  native  workers  points  to 
challenges 
integration. 
Therefore,  it  is  relevant  to  consider  measures 
to  integrate  migrants  into  the  labour  market, 
including  displaced  people  fleeing  Ukraine, 

from  measures 

labour  market 

in 

(25)  European Business and Consumer Survey (EU-BCS). 

13 

 
                                                 
similar  to  measures  in  the  ‘Talent  Boost’ 
programme. 

between  the  social  partners  in  October  2022 
to increase wages (28).  

The social and healthcare sector 
faces critical staff shortages 

The  social  and  health  care  sector  faces 
significant 
partially 
challenges, 
addressed  under  the  RRP.  While  Finland 
performs  well  on  most  social  indicators,  self-
reported unmet medical needs remain high. In 
2022, 6,5% of the Finnish population reported 
unmet medical care needs. This is higher than 
in 2021 (4.4%) when it was well above the EU 
average of 2%. Waiting times for primary and 
specialised  care  have  been 
long,  further 
aggravated  by  the  COVID-19  pandemic,  and 
shortages  of  social  and  healthcare  staff.  In 
terms  of  healthcare  personnel,  Finland  has 
fewer  professionally  active  doctors  than  the 
EU average, and while it used to have a higher 
number  of  nurses  than  the  EU  average,  staff 
shortages  in  nursing  have  grown  dramatically 
in  recent  years  (see  also  Annex  16).  In  2020, 
the Ministry  of Finance estimated that a total 
of 200 000 people would need to be recruited 
in  the  social  and  healthcare  sector  by  2035, 
out  of  which  at  least  10%  would  need  to  be 
foreign-born workers. 

in 

Staff  shortages  remains  a  critical  issue. 
According  to  a  recent  national  Occupational 
Barometer (26),  25%  of 
the  occupations 
assessed  suffer  from  labour  shortages.  Three 
quarters  of  those  in  the  top  15  list  are  from 
the  social  and  healthcare  sector.  Since  the 
the  COVID-19  pandemic, 
beginning  of 
employment 
the  health  sector  has 
decreased by 6% in Finland, while it increased 
in  the  EU  on  average  by  7%.  Especially  the 
shortage  of  nurses  has  rapidly  increased. 
There were on average 8 051 open vacancies 
in the first half of 2022 for nurses and 15 495 
for 
in 
attracting  and  retaining  workers  are  mainly 
due  to  poor  pay  and  working  conditions, 
although  an  agreement  was  negotiated 

nurses (27).  Difficulties 

practical 

(26)  TOP 15 (ammattibarometri.fi)  

(27)  Ammattibarometri 

reforms 

Amid  already  severe  staff  shortages  in 
the health sector, some health and social 
services 
require  additional 
recruitment.  One  of  these  reforms  is  the 
requirement  for  a  gradual  increase  of  care 
personnel in the long-term care units from 0.5 
per patient in 2020 to 0.7 in 2023. The target 
was  postponed  from  April  to  December  2023 
due  to  shortage  of  workforce.  In  November 
2022  the  estimated  additional  recruitment 
need  for  nursing  personnel  to  fulfil  the 
increase to 0.7 in the carer/patient ratio in the 
long-term  care  units  was  2900  full-time 
persons (29). 

Finland is implementing  a comprehensive 
social  and  health  services  reform,  partly 
supported  by  the  RRP.  The  reform 
is 
expected  to 
improve  the  availability  and 
quality  of  basic  public  social  and  healthcare 
services.  In  parallel,  a  law  was  passed  in 
January  2023,  tightening  the  care  guarantee 
to improve access to non-urgent primary care 
by  reducing  the  waiting  time  to  7  days.  In 
October  2022,  42%  of  the  patients  in  the 
worst  performing  region  in  northern  Finland 
had access to care within 7 days. In all regions, 
some  patients  waited  over  3  months (30).  To 
solve  the  imbalance  between  the  tightening 
legislative  requirements  in  the  sector  and  the 
scarcity  of  workers 
these 
requirements, more measures are warranted. 

implement 

to 

In  February  2023, 
the  Government 
launched  a  roadmap  to  address  the 
availability  of  social  and  healthcare 
sector 
roadmap 
envisages  measures  to  i) increase  the  intake 
of  students  in  education  programmes  for  the 

personnel (31). 

The 

(28)  Tällainen on kolmevuotinen SOTE-sopimus ja 

palkkaohjelma (jhl.fi) / Tällainen on kolmevuotinen 
SOTE-sopimus ja palkkaohjelma (jhl.fi) 

(29)  Vanhusten ympärivuorokautisen hoidon henkilöstön 
määrä nousee, mutta kotihoidossa asiakaskäynnit ja 
rekrytoinnit kääntyneet laskuun - Tiedote - THL 

(30)  Hoitoonpääsy perusterveydenhuollossa - THL 

(31)  Tiekartta 2022–2027 - Sosiaali- ja terveysalan 

henkilöstön riittävyyden ja saatavuuden turvaaminen 
(valtioneuvosto.fi) 

14 

 
                                                 
                                                 
places on early childhood education, with 10% 
of these places being supported by the RRP.  

Low 
tertiary  educational  attainment 
among  young  people  has  been  a  long-
standing issue for Finland. It is significantly 
lower  compared  with  many  other  advanced 
OECD  economies,  including  its  Nordic  peers. 
This  is  due  to  the  very  limited  availability  of 
study places in universities relative to demand 
and a restrictive admission process resulting in 
a  high  number  of  applications  being  rejected. 
in 
During  2015-2020,  overall,  universities 
Finland accepted only 30% of applicants, while 
universities of applied sciences accepted 33%. 
These  are  the  lowest  rates  among  the  14 
OECD countries reporting admission rates. The 
government  has  been  tackling  this  issue  for 
many  years,  and  recently  has  committed  to 
increasing  the  share  of  higher  education 
graduates  to  at  least  50%  of  the  25-34  age 
group  by  2030  to  meet  society’s  needs  (The 
Vision  for  Higher  Education  and  Research 
2030).  The  student  admission  process  was 
reformed in 2018, but little is known about its 
impact,  which  the  Finnish  authorities  are 
currently assessing. According to the OECD (33), 
the relatively low number of higher education 
graduates 
to 
innovation. 

the  major  bottleneck 

is 

Achieving  higher  enrolment  numbers 
requires  a  clear  long-term  plan.  It  should 
focus on how to increase the number of study 
places  to  meet  current  and  future  skills 
demand  and  include  a  strong  commitment  to 
greater  funding.  Implementing  such  a  long-
term  plan  could  include  a  revision  of  the 
current  higher  education  funding  system  to 
prioritise  financial  allocations  for  the  skills 
areas most in demand, while ensuring delivery 
of quality education and research. 

social and healthcare sector, and ii) reform the 
division of responsibilities in the field, and the 
organisation of work at workplaces. The aim is 
to allow social and healthcare professionals to 
focus  their  work  on  duties  corresponding  to 
their  education.  Consequently,  the  roadmap 
recommends  an  increase  in  the  number  of 
assisting  and  support  service  personnel.  The 
roadmap  also  aims  to  i)  boost  international 
recruitment  and  work-based  immigration,  ii) 
improve  work  ability (32)  and  well-being  at 
work, and iii) exploit technological solutions in 
innovative ways.   

Tackling negative trends in 
education is urgent 

high, 

Since  2006,  a  negative  trend  in  average 
results  of  the  OECD’s 
international 
assessment  survey 
(PISA)  has  been 
observed  (see Annex 15). Despite the overall 
in  basic  skills 
performance  of  students 
remaining 
indicators, 
particularly  in  reading,  represent  the  sharpest 
decrease  among  PISA-participating  countries. 
The  gap  in  reading  performance  has  widened 
since  PISA  2009  and  is  closely  related  to  a 
student’s  socio-economic  status  and  whether 
or not they come from a migrant background, 
which  calls  for  more  support  to  be  given  to 
learning in the education system.  

Finland’s 

The  teaching  profession  in  Finland  is 
becoming  less  attractive.  The  numbers 
applying  to  become  class  teachers  nearly 
halved between 2013 and 2019. This situation 
is  particularly  concerning  for  early  childhood 
education  and  care 
(ECEC)  where  staff 
shortages  pose  a  serious  challenge  to  the 
expected increase in ECEC participation. This is 
mainly  due  to  low  salary  levels,  poor  working 
conditions  and  restrictive  admission  into  the 
profession. Finnish authorities are taking steps 
to address some of these issues by increasing 
in  ECEC  and  expanding 
teacher  salaries 
tertiary  education  offer  with  400  extra  study 

(32)  Work ability comprises the physical and mental health 
and abilities,  skills and knowledge, values as well as 
motivation, management and working conditions 
(Työterveyslaitos) 

(33)  OECD (2022), OECD Economic Surveys: Finland 2022, 

OECD Publishing, Paris, 
https://doi.org/10.1787/516252a7-en 

15 

 
                                                 
                                                 
Green ambitions need to be 
matched by investments and 
shortened permitting procedures 

carbon 

The  RRP  focuses  on  reducing  greenhouse 
in  four  key  emitting 
gas  emissions 
investments  are 
sectors,  but  more 
required  for  Finland  to  achieve 
its 
ambitious climate goals. This is the case for 
all emitting sectors, including energy, industry, 
buildings and transport, where large additional 
investment  needs  exist  in  order  to  achieve 
overall 
The 
neutrality 
procurement of a floating liquefied natural gas 
terminal which has been available since winter 
2022,  strengthened  Finland’s  security  of 
energy  supply  (see  Annex  7).  Beyond  this, 
reduction in Finland’s reliance on fossil fuels is 
essential  to  improve  security  of  supply.  While 
no  longer  importing  Russian  gas,  one  of  the 
two  nuclear  power  plants  in  Finland  remains 
entirely  dependent  on  Russian  fuel,  adding  to 
the  challenge  of  EU  energy  dependence  on 
Russia.  

targets. 

and 

risk 

increase 

throttling 

permitting 

related 
Lengthy 
procedures 
renewable 
energy investments. While Finland’s share of 
renewables  in  the  energy  mix  is  already  high 
in 
(see  Annex  6),  the  planned 
renewable  energy  to  meet  the  2035  carbon 
neutrality  target  is  expected  to  require  large 
investments  in  and  effective  management  of 
network  infrastructure.  Streamlining  permit 
procedures  for  renewable  energy  plants  by 
removing  process-related  barriers,  especially 
for  administrative  procedures,  could  speed  up 
the 
investments.  There  are 
indications  that  the  high  energy  prices  have 
led  to  increased  investment  by  industry  in 
energy  efficient  technologies,  including  in  the 
chemical  industry.  Creating  high-value  added 
clean  tech  products  with  renewable  energy 
could  form  a  strong  basis  for  Finland’s 
competitiveness,  but  the  permitting  system 
needs  to  support 
innovative  technologies. 
Strong  interconnections  between  Finland  and 
neighbouring countries are needed to ensure a 
well-functioning electricity market in the whole 
the  projected 
increase 
region  and 

roll-out  of 

to 

contribution of renewable energy to the energy 
mix. 

of 

Timely  implementation  of  the  measures 
in  the  fossil-free  transport 
included 
is  required  for  Finland  to 
roadmap 
achieve 
reducing 
its  objective 
emissions  from  transport  by  50%  by 
2030  compared  to  2005.  Following  higher-
than-expected  sales  of  electric  vehicles  in 
Finland  in  2021  and  2022,  the  government 
has  revised  upwards  its  target  for  electric 
vehicles in the vehicle fleet. However, a further 
roll-out  of  electric  vehicles  beyond  the  most 
densely  populated  areas  of 
the  country 
requires  an  electric  vehicle  charging  network 
to be completed across the country. Given the 
long distances and sparsely populated areas in 
some  regions,  the  necessary  investments  are 
unlikely  to  happen  on  market  terms.  Grid 
transmission  capacity  and  availability  of  land 
could  limit  the  further  adoption  of  electric 
vehicles,  particularly  the  electrification  of 
heavy-duty vehicles. Further investment needs 
in transport include improving the efficiency of 
the  public 
transport  system,  which  has 
suffered  from  underinvestment  during  the 
pandemic, and electrifying the rail network. At 
the  same  time,  the  transport  network  has  a 
large and increasing maintenance deficit. 

In  the  context  of  the  green  transition, 
labour  shortages  in  key  sectors  have 
increased  in  recent  years.  These  shortages 
are linked to a lack of relevant skills, creating 
bottlenecks  in  the  transition  to  a  net-zero 
economy.  In  2022,  labour  shortages  were 
reported  in  Finland  for  37  occupations  that 
required  specific  skills  or  knowledge  for  the 
green  transition,  including  insulation  workers, 
civil  engineers,  and  plumbers  and  pipe 
fitters (34).  The  job  vacancy  rate  increased 

(34)  Data on shortages are based on European Labour 

Authority (2023), EURES Report on labour shortages 
and surpluses 2022. National authorities report through 
a questionnaire, based on administrative data and other 
sources as submitted by the EURES National 
Coordination Offices (definitions of shortages differ, 
thus data is not comparable across countries and 
covers a wide variety of sectors). Skills and knowledge 
requirements are based on the ESCO (European Skills 
Competences and Occupations) taxonomy on skills for 
the green transition (for occupations at ISCO 4-digit 
level of which there are 436 in total). Examples are 

16 

 
                                                 
in  2015 

across key sectors, such as construction (from 
1.4% 
in  2021)  and 
to  2.5% 
manufacturing (from 1.2% in 2015 to 1.4% in 
2021),  with  both  sectors  standing  below  the 
EU average of 3.6% and 1.9%, respectively, in 
2021 (35).  In  2022,  labour  shortages  were 
reported as a factor constraining production in 
industry (for 24.4% of firms) and construction 
(for  35.5%  of  firms) (36).  Upskilling  and 
reskilling for the green transition, including for 
the  people  most  affected,  and  promoting 
inclusive  labour  markets  are  essential  policy 
levers  for  accelerating  the  transition  to  net-
zero and ensuring its fairness (see Annex 8). 

Finland  continues  to  underperform  in 
certain  aspects  of  the  circular  economy, 
particularly  on  material  use.  Finland  has 
the highest material footprint in the EU-27, at 
34 tonnes per head in 2020 against an EU-27 
average  of  13.7  tonnes  per  head.  Resource 
productivity in Finland is also the fourth lowest 
in the EU at 1 power purchasing standard per 
kilogram  against  an  EU-27  average  of  2.3  in 
2021.  On  the  circular  material  use  rate  the 
country  is  the  third  lowest  performer  (2%  of 
all  materials).  Finland  made  considerable 
progress in curbing its landfill rate over recent 
years,  but  did  so  by  increasing  incineration 
capacity  (63%  of  all  municipal  waste  treated 
in  2021).  Overall  municipal  waste  increased 
between  2016  and  2021,  from  504 kg  per 
head  to  609 kg  per  head.  This  suggests  that 
Finland’s  economic  growth 
is  not  yet 
decoupled  from  waste  generation  (see  Annex 
9). 

identified based on their ESCO ‘greenness’ score and 
relevant sectors.  

(35)  Eurostat (JVS_A_RATE_R2). 

(36)  European Business and Consumer Survey. 

17 

 
 
                                                                        
  reforming  the  social  security  system  to 
increase  the  efficiency  of  social  benefits, 
improve  incentives  to  work  and  support 
sustainability of public finances in the long 
term,  thereby  lessening  the  impacts  of 
population ageing;  

education 

  ensuring  quality  and  a  more  supportive 
basic 
increasing 
enrolment  numbers  in  higher  education  to 
meet current and future skills demand and 
boosting  human  and  social  capital  and 
innovation to increase productivity; 

system, 

target 
in 

  promoting  further  investments  to  ensure 
progress  is  made  towards  meeting  the 
neutrality, 
2035 
for 
particularly 
renewable  energy  and 
sustainable  transport,  speeding  up  the 
circular 
and 
strengthening  the  capacity  of  the  land  use 
sector for carbon removals; 

transition, 

economy 

carbon 

  speeding  up  permitting  and  environmental 
timely 
energy 

renewable 

ensure 

the 

of 

to 

procedures 
deployment 
investments. 

KEY FINDINGS 

Finland’s  RRP 
includes  measures  to 
address  a  series  of  Finland’s  structural 
challenges through: 

  helping  reduce  greenhouse  gas  emissions 
in  the  most  relevant  sectors  through 
reforms and investments;  

  supporting 

high-speed 

broadband 
the  continuous 
connectivity, 
learning  framework  and  promoting  digital 
skills;  

reforming 

  investing  in  research,  development  and 

innovation (RDI);  

  supporting  initiatives  to  address  Finland’s 
labour  and  skills  shortages,  and  tackling 
structural unemployment. 

Finland  should  proceed  with  the  steady 
implementation  of  its  revised  recovery  and 
resilience  plan  and  swiftly 
the 
REPowerEU  chapter  with  a  view  to  rapidly 
starting its implementation. 

finalise 

Beyond  the  reforms  and  investments  in 
the RRP, Finland would benefit from: 

  taking  steps  to  strengthen  public  finances, 
including  the  regular  conduct  of  spending 
and  structural  reviews,  as  well  as  tax 
expenditure reviews;  

  pursuing the healthcare and social services 
reform  and  ensuring 
the 
objectives  of  improving  equal  access  to 
services 
cost-
effectiveness  of  the  healthcare  and  social 
care sector;  

it  achieves 

increasing 

and 

the 

  addressing  labour  and  skills  shortages,  in 
particular  to  support  the  green  and  digital 
improve  the  service 
transition,  and  to 
delivery in the health and social care sector; 

18 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

LIST OF TABLES 

A2.1. 
A3.1. 

Summary table on 2019-2022 CSRs 
Key elements of the Finland’s RRPs 

21 

24 

24 

26 

29 

31 

33 

34 

34 

38 

43 

46 

46 

48 

50 

52 

56 

58 

58 

60 

62 

65 

67 

67 

69 

71 

72 

27 
29 

 
 
 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key energy indicators 
A8.1. 
Key indicators for a fair transition in Finland 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Finland 
A14.2.  Situation of Finland on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A18.1.  Financial soundness indicators 
A19.1.  Tax indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Finland 
A21.2.  Heat map of fiscal sustainability risks - Finland 

LIST OF GRAPHS 

Progress towards the SDGs in Finland in the last 5 years 
Finland’s progress on the 2019-2022 CSRs (2023 European Semester) 
Share of RRF funds contribution to each policy pillar 
Total grants disbursed under the RRF 
Fulfilment status of milestones and targets 
Cohesion policy funds 2021-2027 in Finland: budget by fund 
Synergies between cohesion policy funds and the RRF with its six pillars in Finland 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Finland 
Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
Energy mix (top) and electricity mix (bottom), 2021 
Thematic – environmental investment needs and current investment, p.a. 2014-2020 
Share of gas consumption per sector, 2021 
Gas consumption per industrial sector, 2021 (% of total gas consumption in industry) 
Finland’s retail energy prices for industry (top) and households (bottom) 
Patent families in Energy Union R&I priorities 
Fair transition challenges in Finland 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
Trend in material use 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.1. 
A3.2. 
A3.3. 
A4.1. 
A4.2. 
A4.3. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A7.4. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  R&D intensity in % of GDP, 2021 
A12.1.  Business environment and competitiveness drivers 
A12.2.  Productivity by sector 
A12.3.  Total factor productivity 
A13.1.  Finland. Regulatory impact assessment 
A13.2.  Finland. Ex post evaluation of legislation 
A15.1.  Trend in reading performance in PISA mean score, 2003-2018 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2019-2070 
A17.1.  GDP per capita (2010) and GDP growth (2011-2020) in Finland 
A17.2.  Labour productivity in Finland 
A18.1.  Credit growth 
A19.1.  Tax revenues for different tax types as % of total taxation 
A19.2.  Tax wedge for single and second earners as a % of total labour costs, 2022 

22 

33 
34 
38 
43 
46 
48 
51 
52 
56 
58 
59 
60 
62 
67 
69 
71 
73 
74 

25 
26 
29 
30 
30 
31 
31 
32 
34 
35 
36 
38 
38 
39 
41 
43 
44 
46 
46 
50 
52 
52 
53 
56 
56 
60 
62 
62 
65 
65 
67 
70 
70 

 
 
 
LIST OF MAPS 

A17.1.  Regional competitiveness index 2022 

66 

23 

 
 
 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

This  Annex  assesses  Finland’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change  and  the 
environmental crisis, while ensuring that no one is 
left  behind.  The  EU  and  its  Member  States  are 
committed  to  this  historic  global  framework 
agreement  and  to  playing  an  active  role  in 
maximising  progress  on  the  SDGs.  The  graph 
below  is  based  on  the  EU  SDG  indicator  set 
developed  to monitor progress  on  the  SDGs  in  an 
EU context. 

While  Finland  is  improving  on  most  of  the 
indicators  related  to  environmental 
SDG 
sustainability,  it  still  scores  below  the  EU 
average  on  SDG  7  (Affordable  and  clean 
energy),  SDG  12  (Responsible  consumption 

and  production)  and  SDG  14  (Life  below 
water). At the same time, it is moving away from 
SDG  2  (Zero  hunger),  SDG  11  (Sustainable  cities 
and  communities)  and  SDG  15  (Life  on  land). 
Finland's  obesity  rate  (SDG  2)  is  above  the  EU 
average (20.9% of the population aged over 18 vs 
16.5%  in  the  EU)  after  increasing  from  18.3%  in 
2014 to 20.9% in 2019. In terms of SDG 15 (Life 
on 
land),  Finland's  share  of  forested  area 
compared  to  total  land  area    decreased  from 
71.3% in 2015 to 69.9% in 2018. On the positive 
side,  Finland  performs  well  and  is  improving  on 
SDG 9 (Industry, innovation and infrastructure) and 
SDG  13  (Climate  action).  Moreover,  Finland  is 
catching  up  with  the  EU  average  on  SDG  7 
(Affordable 
energy),  SDG  12 
(Responsible  production  and  consumption)  and 
SDG  14  (Life  below  water).  In  particular,  Finland 
increased  its  share  of  renewable  energy  in  gross 
final  energy  consumption  (SDG  7)  from  38.9%  in 
2016  to  43.1%  in  2021,  while  its  energy  import 
dependency  decreased  from  47.9%  in  2015  to 

clean 

and 

Graph A1.1: Progress towards the SDGs in Finland in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on the extensive country-specific data on the short-term progress of Member States: Key findings - Sustainable 
development indicators - Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all the indicators for the 
specific goal compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but 
signals that it is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends 
over the past 5 years. The calculation does not take into account any target values as most EU policy targets are only valid for 
the aggregate EU level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

24 

 
 
 
 
 
 
from  EUR  35 330  per  capita  in  2016  to  EUR 
37240 in 2021 (SDG 8). Finland performs well on 
the  independence  of  the  justice  system  and  the 
Corruption  Perceptions  Index  (SDG  16).  However, 
Finland 
the  official 
development assistance goal (SDG 17) with a drop 
of  0.55%  of  GDP  in  2015  to  0.47%  in  2020 
compared  to  an  increase  in  the  EU  average  from 
0.42% to 0.5% over the same period. 

is  moving  away 

from 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

42%  in  2020.  The  first  pillar  of  the  recovery  and 
resilience plan (RRP) includes investments in clean 
energy  (SDG  7),  decarbonisation  of  industry  (SDG 
9)  and  biodiversity  (SDGs  14  and  15).  On  the 
reform  side,  the  Climate Act  entered into  force  in 
2022 (SDG 13).  

Finland  performs  well  on  SDG  indicators 
related  to  fairness  (SDGs  1,  3,  4,  5,  8,  10) 
and  is  improving  on  SDG  7  (Affordable  and 
clean  energy).  Finland  performs  well  on  the 
indicator  for  people  at  risk  of  poverty  or  social 
exclusion  (SDG  1;  14.2%  of  population  in  2021 
compared  to  16.5%  in  2016  and  the  EU  average 
of  21.7%  in  2021)  and  on  smoking  prevalence 
(SDG  3;  15%  of  the  population  aged  over  15  in 
2020  compared  to  19%  in  2014  and  to  the  EU 
average of 25% in 2020). In addition, Finland has 
improved  on  participation 
in  early  childhood 
education  (SDG  4;  90.9%  in  2020  compared  to 
79.8% in 2015), the gender employment gap (SDG 
5; 2% in 2021 compared to 3.2% in 2016 and an 
EU  average  of  10.8% 
the 
employment 
in  2021 
compared to 72.4% in 2016 and an EU average of 
73.1%  in  2021).  The  RRP  includes  measures  to 
support  the  ongoing  reform  of  health  and  long-
term care, aiming to improve the health and well-
being  status,  in  Component  P4C1  (Social  welfare 
and health care services). 

(SDG  8;  76.8% 

in  2021)  and 

rate 

Finland  performs  well  on  all  SDGs  on 
productivity (SDGs 4, 8, 9). Compared to the EU 
average  (53.9%),  Finland  performs  very  well  in 
digital skills with a 79.2% share of adults with at 
least basic digital skills in 2021 (SDG 4). Finland's 
long-term  unemployment  rate  decreased  over 
recent years, falling to 1.8% in 2021 from 2.9% in 
2016  (SDG  8).  While  Finland’s  spending  on  R&D 
increased from 2.72% of GDP in 2016 to 2.98% in 
2021, it is still below the 2009 peak of 3.73% and 
the  national  target  of  4%  (SDG  9).  The  RRP 
includes  measures  to  further  improve  Finland's 
productivity  by  boosting  spending  on  research, 
development  and 
innovation  through  funding 
packages  to  promote  the  green  and  digital 
transition, notably in Components P3C3 (Research 
(Strengthening 
infrastructure) 
competitiveness) of the plan. 

P3C4 

and 

Finland  performs  well  on  SDG  indicators 
related  to  macroeconomic  stability  (SDGs  8 
and  16)  but  still  needs  to  catch  up  on  SDG 
17,  when  comparing  its  performance  to  the 
EU’s.  Finland  increased  its  real  GDP  per  capita 

25 

 
 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Finland’s progress on the 2019-2022 
CSRs (2023 European Semester) 

Source: European Commission 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (37) 
addressed  to  Finland  as  part  of  the  European 
Semester. These recommendations concern a wide 
range of policy areas that are related to 11 of the 
17 Sustainable Development Goals (see Annexes 1 
and 3). The assessment considers the policy action 
taken by Finland to date (38) and the commitments 
in its recovery and resilience plan (RRP) (39). At this 
stage  of  RRP  implementation,  88%  of  the  CSRs 
focusing  on  structural  issues  from  2019-2022 
have  recorded  at  least  ‘some  progress’,  while  9% 
recorded  ‘limited  progress’  (see  Graph  A2.1).  As 
the  RRP  is  implemented  further,  considerable 
progress in addressing structural CSRs is expected 
in the years to come. 

(37)  2022 CSRs: EUR-Lex - 32022H0901(26) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(27) - EN - EUR-Lex 

(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(26) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(26) - EN - EUR-Lex 
(europa.eu) 

(38)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(39)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

26 

No progress3%Limited progress9%Some progress52%Substantial progress27%Full implementation9% 
 
 
                                                 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

27 

FinlandAssessment in May 2023*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Some progressEnsure that the nominal growth rate of net primary government expenditure does not exceed 1.9 % in 2020, corresponding to an annual structural adjustment of 0.5 % of GDP. Not relevant anymoreNot applicableSDG 8, 16Improvethecost-effectivenessofandequalaccesstosocialandhealthcare services.Some progressRelevant RRP measures planned as of 2021, 2023, 2024, and 2025 SDG 3, 8, 162019 CSR 2Some progressImprove incentives to work Some progressRelevant RRP measures planned as of 2022, 2023, 2024, and 2025 SDG 8and enhance skills Some progressRelevant RRP measures planned as of 2021, 2022, 2023, 2024, and 2025 SDG 4and enhance active inclusion, notably through well-integrated services for the unemployed and the inactive.Substantial progressRelevant RRP measures planned as of 2022, 2023, 2024, and 2025 SDG 82019 CSR 3Some progressFocus investment-related economic policy on research and innovation, taking into account regional disparities,Substantial progressRelevant RRP measures planned as of 2021, 2022, 2023, 2025 and 2026 SDG 9, 10, 11focus investment-related economic policy on low carbon and energy transition, taking into account regional disparities,Some ProgressRelevant RRP measures planned as of 2021, 2022, 2023, 2024, 2025 and 2026 SDG 7, 9, 10, 11, 13and focus investment-related economic policy on sustainable transport, taking into account regional disparitiesSome ProgressRelevant RRP measure planned as of 2022, 2024, and 2026 SDG 10, 112019 CSR 4Some progressStrengthen the monitoring of household debt Substantial ProgressRelevant RRP measure planned as of 2023, 2025, and 2026 SDG 8and establish the credit registry systemSome ProgressRelevant RRP measure planned as of 2023, 2025, and 2026 SDG 82020 CSR 1Some progressTakeallnecessarymeasures,inlinewiththegeneralescapeclauseoftheStabilityandGrowthPact,toeffectivelyaddresstheCOVID-19pandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuring debt sustainability, while enhancing investment. Not relevant anymoreNot applicableSDG 8, 16Addressshortagesofhealthworkerstostrengthentheresilienceofthe health system Some progressRelevant RRP measure planned as of 2021, 2022 and 2023 SDG 3and improve access to social and health services.Some progressRelevant RRP measure planned as of 2021, 2023, 2024 and 2025 SDG 32020 CSR 2Some progressStrengthen measures to support employment and Some progressRelevant RRP measure planned as of 2021, 2022, 2023, 2024 and 2025 SDG 8bolster active labour market policies.Some progressRelevant RRP measure planned as of 2022, 2023, 2024 and 2025 SDG 42020 CSR 3Some progressTake measures to provide liquidity to the real economy, in particular to small and medium-sized enterprises. Full ImplementationRelevant RRP measure planned as of 2021, 2022, 2023, 2024, 2025 and 2026 SDG 8, 9Front-load mature public investment projects and Full implementationSDG 8, 16promote private investment to foster the economic recovery. Full implementationSDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonclean and efficient production and use of energy,Some progressRelevant RRP measure planned as of 2021, 2022, 2023, 2025 and 2026 SDG 7, 9, 13 sustainable and efficient infrastructure Limited progressRelevant RRP measure planned as of 2021, 2022, 2023, 2024, 2025 and 2026 SDG 7, 9, 11, 13as well as research and innovation.Some progressRelevant RRP measure planned as of 2021, 2022, 2023, 2025 and 2026 SDG 92020 CSR 4Limited progressEnsureeffectivesupervisionandenforcementoftheanti-moneylaundering framework.Limited progressRelevant RRP measure planned as of 2025 and 2026 SDG 8, 162021 CSR 1Substantial ProgressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment. Substantial ProgressNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term. Substantial ProgressNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition. Substantial ProgressNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Some ProgressNot applicableSDG 8, 16 
 
 
  
 
Table (continued) 

Note: 
* See footnote (39).  
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission.  
Source: European Commission. 

28 

2022 CSR 1Some ProgressIn 2023, ensure that the growth of nationally financed primary current expenditure is in line with an overall neutral policy stance, taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. Stand ready to adjust current spending to the evolving situation.No ProgressNot applicableSDG 8, 16 Expand public investment for the green and digital transitions, and for energy security taking into account the REPowerEU initiative, including by making use of the Recovery and Resilience Facility and other Union funds. Substantial ProgressNot applicableSDG 8, 16For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions. Substantial ProgressNot applicableSDG 8, 16Present policy proposals for the social security reform, aiming to increase the efficiency of the system of social benefits, improving incentives to work, and also supporting long-term sustainability of public finances.Limited ProgressSDG 1, 2, 102022 CSR 2Proceed with the implementation of its recovery and resilience plan, in line with the milestones and targets included in the Council Implementing Decision of 29 October 2021. Proceed with the implementation of the agreed 2021-2027 cohesion policy programme for Finland, and swiftly finalise the negotiations with the Commission of the 2021-2027 cohesion policy programming documents for the Åland Islands and the Just Transition Fund with a view to starting their implementation.2022 CSR 3Some ProgressReduce overall reliance on fossil fuels and diversify imports of fossil fuels.Some ProgressRelevant measures planned as of 2021,2022 2023, 2024, 2025 and 2026SDG 7, 9, 13 Accelerate the deployment of renewables, including by further streamlining permitting procedures, Some ProgressRelevant measures planned as of 2021,2022, 2023 and 2026SDG 7, 8, 9, 13and boost investment in the decarbonisation of industry Some ProgressRelevant measures planned as of 2021, 2022, 2023, 2024, 2025 and 2026SDG 7, 9, 13and transport, including electrification of the transport sector. Substantial ProgressRelevant measures planned as of 2021, 2022, 2023, 2024, 2025 and 2026SDG 11Develop energy infrastructure to increase security of supply.Some ProgressRelevant measures planned as of 2021, 2022, 2023, 2025 and 2026SDG 7, 9, 13RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

disbursed  EUR 271  million  to  Finland  in  pre-
financing on 21 January 2022, equivalent to 13% 
of the initial financial allocation. 

Finland’s progress in implementing its plan is 
published  in  the  Recovery  and  Resilience 
Scoreboard (40).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 
the RRF as a whole, in a transparent manner. The 
graphs below show the current state of play of the 
milestones  and  targets  to  be  reached  by  Finland 
and  subsequently  assessed  as  satisfactorily 
fulfilled by the Commission. 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience  against  future  shocks.  The  RRF 
also  contributes  to  implementation  of  the 
SDGs  and  helps  to  address  the  Country 
Specific  Recommendations  (see  Annex 2). 
Finland submitted its initial recovery and resilience 
plan  (RRP)  on  27 May 2021.  The  Commission’s 
positive  assessment  on  4  October  2021  and 
Council’s  approval  on  29 October 2021  paved  the 
way  for  disbursing  2.1  billion  in  grants  under  the 
RRF over the 2021-2026 period.   

 Since  the  entry  into  force  of  the  RRF 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
Finland  was  moreover  updated  on  30  June  2022 
to an amount of EUR 1.82 billion in grants.  

Table A3.1: Key elements of the Finland’s RRPs 

Source: European Commission  

 In  this  context,  Finland  submitted  an 
amended  RRP  to  the  Commission  on  26 
January  2023  take  account  of  the  revised 
maximum  financial  contribution,  in  line  with 
Article 18 of the RRF Regulation. The allocation 
for  Finland  was  reduced  by  EUR  263  million. 
Consequently, 
funding 
proportionally  across  the  four  pillars  of  the  plan. 
Cuts concerned 20 measures in the plan.   

reduced 

Finland 

EUR 271 million has so far been disbursed to 
Finland  under  the  RRF.  The  Commission 

(40)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

29 

Current RRPScope Revised plan (Article 18)CID adoption date14 March 2023Total allocation EUR 1.82 billion in grants (0,7% of GDP) Investments and reforms 37 investements and 18 reformsTotal number of milestones and targets131 
 
 
  
 
                                                 
 
Graph A3.1: Share of RRF funds contribution to each policy pillar 

Note: Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed 
on this chart amounts to 200% of the estimated cost of the RRP. The bottom part represents the amount of the primary pillar, the 
top part the amount of the secondary pillar. 
Source: RRF Scoreboard https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/country_overview.html 

Graph A3.2: Total grants disbursed under the RRF 

Graph A3.3: Fulfilment status of milestones and 
targets 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

30 

€ 0.271billionSatisfactorily fulfilledNot fulfilled0%10%20%30%40%50%60%Green transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
 
 
   
 
 
 
 
   
 
 
 
   
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives. 

Graph A4.1: Cohesion policy funds 2021-2027 in 
Finland: budget by fund 

which  EUR  64  million  is  targeted  at  developing 
green  skills  and  jobs  and  EUR  38  million  at 
developing digital skills. 

Of  the  investments  mentioned  above,  EUR 
184  million  will  be  invested  in  line  with 
REPowerEU objectives. This is on top of the EUR 
162  billion  dedicated  to  REPowerEU  under  the 
2014-2020 budget. EUR 184 million (2021-2027) 
and EUR 153 million (2014-2020) is for improving 
energy efficiency; and EUR 9 million (2014-2020) 
is for renewable energy, storage and smart grids.  

Graph A4.2: Synergies between cohesion policy 
funds and the RRF with its six pillars in Finland 

(1) million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

smart 

regional 

line  with 

In  2021-2027,  in  Finland,  cohesion  policy 
funds (41)  will  invest  EUR  877  million  in  the 
green  transition  and  EUR  168  million  in  the 
digital  transformation  as  part  of  the 
country’s  total  allocation  of  EUR  3.2  billion. 
In  particular,  the  European  Regional  Development 
Fund  (ERDF) (42)  will  enhance  R&D  and  innovation 
specialisation 
in 
strategies,  harness  digitalisation  and  SME  growth 
and  accelerate  the  greening  of  the  economy  by 
promoting  energy  efficiency,  climate  change 
adaptation  and  resource  efficiency.  Close  to 
11 000  companies  will  be  supported.  Particular 
attention should be paid to activation measures to 
improve  the  quality  of  project  applications.  The 
Just  Transition  Fund  (JTF)  will  invest  in  the 
diversification of regional economies and in the re- 
and  upskilling  of  the  workforce  in  regions  most 
affected by transition from peat to cleaner energy 
sources.  The  JTF  will  help  Finland  to  fulfil  its 
commitment to halve the use of peat in its energy 
mix  by  2030.  The  European  Social  Fund  Plus 
(ESF+)  will  support  adult 
learning,  re-  and 
upskilling  and  promoting  employment  with 
investments  worth  almost  EUR  365  million,  of 

(41)  European Regional Development Fund (ERDF), European 

Social Fund+ (ESF+), Just Transition Fund (JTF) and Interreg, 
on Cohesion Open Data.  

(42)  ERDF’s expected achievements from the 2021-2027 

programmes. 

31 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  make 
EUR  1.5  billion  available  to  Finland (43)  with 
absorption 
national 
financing,  the  total  investment  amounts  to  EUR 
2.9 billion - around 0.2% of GDP for 2014-2020.  

of  84% (44). 

Including 

Finland  continues  to  benefit  from  cohesion 
policy flexibility to support recovery, step up 
convergence  and  provide  vital  support  to 
regions  following  the  COVID-19  pandemic. 
The  Recovery  Assistance  for  Cohesion  and  the 
Territories  of  Europe  instrument  (REACT-EU) (45) 
under NextGenerationEU provides EUR 171 million 
on 
the  2014-2020  cohesion  policy 
allocation  for  in  Finland.  REACT-EU  financed  over 
1 400  digitalisation,  green  economy  and  human 
capital projects. More than 1 000 companies were 
selected  for  support,  and  almost  8 500  new  jobs 
are expected to be  added. Human capital projects 

top  of 

(43)  Cohesion policy funds include the ERDF, ESF. According to the 
‘N+3 rule’, the funds committed for 2014-2020 must be 
spent by 2023. REACT-EU is included in all figures. Data 
source: Cohesion Open Data. 

(44)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

(45)  REACT-EU allocation on Cohesion Open Data. 

1,496 47%1,012 32%665 21%ERDFESF+JTF305631,3311,1038118771689528581480200400600800100012001400Green transitionDigitaltransformationSmart, sustainableand inclusivegrowthSocial and territorialcohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgenerationEU CP 2014-2020 (million EUR)EU CP 2021-2027 (million EUR) 
 
  
                                                 
   
                                                 
 
 
will  reinforce  the  ability  of  workers,  businesses 
and  entrepreneurs  to  adapt  to  a  digital  economy. 
With  SAFE  (Supporting  Affordable  Energy),  the 
2014-2020  cohesion  policy  funds  may  also  be 
mobilised  by  Finland 
to  support  vulnerable 
jobs  and  companies  particularly 
households, 
affected by high energy prices.  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
to 
the  Sustainable  Development  Goals 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
innovation  and 
‘industry, 
notably  SDG  9 
infrastructure’  and  SDG  8 
‘decent  work  and 
economic growth’ (46).  

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in Finland 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

Finland  also  benefits 
from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far allocated EU funding of EUR 101 million to 13 
specific  projects  on  strategic  transport  networks. 
Similarly,  Horizon  Europe  has  so  far  allocated 
nearly EUR 332 million to Finnish R&I actors, while 
in the previous programming period, Horizon 2020 
earmarked EUR 1.5 billion. The Public Sector Loan 
Facility  established  under  the  Just  Transition 
Mechanism  makes  EUR  35.3  million  of  grant 
support  from 
the  Commission  available  for 
projects  located  in  Finland  for  2021-2027,  which 
will  be  combined  with  loans  from  the  EIB  to 
support  investments  by  public  sector  entities  in 
just transition regions. 

Finland 

Instrument 
designing 

(TSI) 
The  Technical  Support 
and 
supports 
in 
implementing  growth-enhancing 
reforms, 
including  for  implementing  its  RRP.  Finland 
has received support since 2019. Examples include 
building  capacity  to  bring  anticipatory  innovation 
to  public  policymaking,  for  integrating  migrants 
across society in areas such as cultural and social 
life, for labour market policies and multilingualism, 
for  accelerating  permitting  for  renewable  energy 
and for developing Do No Significant Harm (DNSH) 
guidelines  to  support  the  implementation  of  the 
green transition (47).   

Fund 

Agricultural 

Other  EU  funds  make  significant  resources 
available  for  Finland.  The  common  agricultural 
policy (CAP) made EUR 8 billion available in 2014-
2022,  and  will  continue  to  support  Finland  with 
EUR 4.4 billion in 2023-2027. The two CAP Funds 
(European  Agricultural  Guarantee  Fund  and 
European 
Rural 
Development),  contribute  to  the  European  Green 
Deal while ensuring long-term food security. They 
promote  social,  environmental  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  in  coordination  with  other  EU  funds. 
The  European  Maritime  and  Fisheries  Fund  made 
EUR 74 million available to Finland in 2014-2020 
and 
the  European  Maritime,  Fisheries  and 
Aquaculture  Fund  makes  EUR  71.8  million 
available in 2021-2027.  

for 

(46)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

(47)  Country factsheets on reform support are available here. 

32 

5971,291213379951,21684029926512202004006008001,0001,2001,400SDG 9 Industry,innovation,infrastructureSDG 8 Decent workand economicgrowthSDG 1 No povertySDG 4 QualityeducationSDG 12ResponsibleconsumptionEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
   
                                                 
 
 
 
                                                 
ANNEX 5: RESILIENCE 

This  Annex 
illustrates  Finland’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (48).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (49)  and  capacities (50)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. In doing so, the RDB help to identify 
areas  for  further  analysis  to  build  stronger  and 
more  resilient  economies  and  societies.  They  are 
summarised  in  Table  A5.1  as  synthetic  resilience 
indices,  which 
relative 
situation for each of the four dimensions and their 
underlying areas for Finland and the EU-27 (51). 

the  overall 

illustrate 

in 

the 

vulnerabilities 

According  to  the  set  of  resilience  indicators 
under  the  RDB,  Finland  generally  displays  a 
lower  level  of  vulnerabilities  than  the  EU 
average.  Finland  shows  low  vulnerabilities  in  the 
social  and  economic  dimension  of  the  RDB, 
medium-low 
digital 
dimension, and medium vulnerabilities in the green 
and  geopolitical  dimensions. 
It  has  higher 
vulnerabilities  than  the  EU  average  in  the  areas 
‘financial  globalisation’,  ‘cybersecurity’  and  ‘raw 
material  and  energy  supply’  (due  to  the  high 
supplier  concentration  in  base  metals  and  energy 
carriers).  Finland  has  lower  vulnerabilities  in  all 
areas of the social and economic dimension and in 
some  areas  of  the  digital  dimension,  such  as  the 
digitalisation of personal and public space (52). 

(48)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(49)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(50)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(51)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

(1) Data are for 2021, and EU-27 refers to the value for the 
EU as a whole. Data underlying EU-27 vulnerabilities in the 
area ‘value chains and trade’ are not available as they 
comprise partner concentration measures that are not 
comparable with Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

Compared  to  the  EU  average,  Finland  shows 
an overall similar yet slightly higher level of 
capacities  across  all  RDB  indicators.  It  has 
overall  high  resilience  capacities in  the  social  and 
economic and the digital dimensions, medium-high 
capacities  in  the  green  dimension  and  medium 
capacities  in  the  geopolitical  dimension.  Finland 
shows stronger capacities than the EU average in 
most areas of the social and economic dimension 
and all areas of the digital dimension (53), but also 
in 
‘ecosystems,  biodiversity  and 
sustainable  agriculture’  and  'value  chains  and 
trade’.  There  is  room  for  improving  capacities 
compared to the EU  level in the area ‘sustainable 
use of resources’ where Finland lags behind the EU 
level mainly due to its relatively low resource and 
energy  productivity  and  the  low  circular  material 
use rate. 

the  areas 

(52)  For example, relative to the EU and other countries, Finland 
shows the lowest vulnerabilities with regard to AROPE, the 
income quintile share ratio, the gender employment gap, 
enterprises without ICT training programs and people not 
having access to digital public services. 

(53)  This is due to its high impact of social transfers on poverty 

reduction and the high expenditures on education, health and 
social protection, but also when it comes to the low 
standardised preventable and treatable mortality, and the 
high digital competences of adults and young people. 

33 

FIEU-27FIEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
                                                 
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

on 

several 

aspects 

Finland’s green transition requires continued 
action 
including 
promoting energy efficiency and restoring its 
natural  carbon  sinks.  Implementation  of  the 
European  Green  Deal  is  well  underway  in  Finland; 
this  Annex  provides  a  snapshot  of  the  key  areas 
involved. (54)  

less  than 

Finland  has  not  yet  defined  all  the  climate 
policy  measures  it  needs  to  reach  its  2030 
target  for  the  effort  sharing 
climate 
sectors (55).  Data  for  2021  on  greenhouse  gas 
emissions  in  these  sectors  are  expected  to  show 
the  country  generated 
its  annual 
emission allocations (56). Current policies in Finland 
are  projected  to  reduce  these  emissions  by  31% 
relative to 2005 levels in 2030, and the additional 
measures tabled would reduce emissions by 34 %. 
This  is  not  a  sufficient  reduction  to  reach  the 
effort  sharing  target  even  before  the  target  was 
raised  to  meet  the  EU’s  55%  objective,  let  alone 
Finland’s  new  target  to  reduce  emissions  by 
50% (57).  In  its  revised    recovery  and  resilience 
plan  (RRP),  Finland  has  allocated  half  of  its 
Recovery  and  Resilience  Facility  grants  to  key 
to  attain  climate 
reforms  and 

investments 

(54)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(55)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(56)  Finland's annual emission allocations for 2021 were some 
29.0 Mt CO2eq, and its approximated 2021 emissions were 
at 27.2 Mt (see European Commission, Accelerating the 
transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343). 

(57)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021. 

34 

objectives (58). Finland’s has its own climate target 
of  achieving  carbon  neutrality  by  2035.  In  July 
2022,  a  new  Climate  Change  Act  entered  into 
force,  specifying  targets  for  reducing  greenhouse 
gas emissions. Based on the recommendations of 
its  climate  change  panel,  these  targets  comprise 
reductions of 60% by 2030, 80% by 2040 and at 
least 90%, aiming for 95%, by 2050 compared to 
1990  levels.  The  land  use  sector  is  also  included 
within the scope of the act. 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency. 

The  deteriorating  capacity  of  the  land  use 
sector  for  net  carbon  removals  has  brought 
Finland  off-track  with  regard  to  its  2030 
carbon  removal  target.  Net  removals  have 
fallen  since  2015,  and  even  turned  into  net 
emissions  in  2021.  Despite  this  trend,  Finland’s 
forests contribute the biggest share of net carbon 
removals.  For  2030,  Finland’s  land  use,  land-use 
change  and  forestry  (LULUCF)  net  removal  target 
implies the removal of 17 754 kt CO2eq (see Table 
A6.1) (59).  

In  2021,  renewable  energy  sources  made  up 
a  significant  part  of  Finland’s  energy  mix, 
having  considerably  increased  their  share 
compared  to  2020,  reaching  44%,  followed 
by  oil  at  23%  and  nuclear  at  18%.  Coal 
represents 9% while natural gas remains stable at 
7%.  In  the  electricity  mix,  renewables  are  even 
more dominant, providing 54% of total electricity, 
with  the  share  of  nuclear  standing  at  33%.  The 
shares  of  coal  and  natural  gas  remain  relatively 

(58)  For example, investments in interconnectors, RES (wind 

energy in particular) and hydrogen.  

(59)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

051015202530354020052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
        
                                                 
 
 
low  at  8%  and  5%,  respectively.  Finland  has 
committed  to  phasing  out  coal  use  by  2029  and 
achieving carbon neutrality by 2035. 

Graph A6.2: Energy mix (top) and electricity mix 
(bottom), 2021 

in decarbonisation of the energy sector, namely in 
energy  transmission  and  distribution  and  in  new 
energy technologies. Furthermore, EUR 136 million 
will be invested in low-carbon hydrogen along the 
hydrogen value chain as well as in carbon capture, 
storage  and  recovery.  On  green  transportation, 
EUR  13.6  million  will  be  invested  in  supporting 
private and public charging points for electric cars, 
gas charging and refuelling infrastructure. 

in 

Finland's  energy  efficiency  targets  for  2030 
will  need  to  be  strengthened.  Finland’s  NECP 
targets  for  final  and  primary  energy  consumption 
(FEC  and  PEC)  were  both  considered  low  in 
ambition  in  the  2020  Commission  assessment. 
Based  on  the  energy  consumption  trajectory  for 
2018-2021,  Finland  is  expected  to  be  on  track  to 
meet its 2030 target for PEC and is expected to be 
on track to meet its 2030 target for FEC, as these 
its  NECP (60).  Strengthening 
were  notified 
ambition  under  the  plan  has  become  even  more 
urgent  in  light  of  the  ‘Fit  for  55’  and  the 
Finland 
REPowerEU 
performed 
outstandingly 
its  energy  savings 
obligation,  set  out  under  Article  7  of  the  Energy 
Efficiency  Directive,  for  the  2014-2020  period. 
Despite these positive observations, next steps for 
Finland include focusing its attention on moderate 
in  households  and  services 
energy  demand 
sectors,  where the  final  energy  demand  has been 
increasing.  In  its  RRP,  Finland  included  several 
measures  targeting  energy  efficiency.   Energy 
efficiency in the industrial sector will benefit from 
investment measures and reforms, focusing on the 
green transition, resource efficiency, electrification 
and reducing carbon footprint of the industry. 

objectives. 
in  fulfilling 

Finland’s  transition  to  sustainable  mobility 
has  taken  off  recently.  Sales  of  zero-emission 
vehicles have recently started to increase. In 2021, 
Finland’s  share  of  zero-emission  vehicles  in  new 
passenger  car  registrations  surpassed  the  EU 
average  for  the  first  time,  and  their  share  in  the 
national  fleet  of  vehicles  has  rapidly  caught  up 
with  the  EU  average  over  recent  years.  The 
electrification of transport has to go hand in hand 
with a higher density of charging points.  

Finland would benefit from investing more in 
environmental  protection  and  in  measures 

(60)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase.  

35 

The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste.  
Source: Eurostat 

Finland  is  one  of  the  EU-27  leaders  in 
renewable energy. The main forms of renewable 
energy  used  are  bioenergy,  fuels  from  forest 
industry side streams and other wood-based fuels, 
hydropower,  wind  power  and  ground  heat. 
Finland´s  NECP  sets  a  51%  target  of  renewable 
sources  in  gross  final  energy  consumption  by 
2030, which was considered as adequate. Finland 
will  need  to  increase  its  renewable  energy  target 
in the updated NECP to reflect the more ambitious 
EU  climate  and  energy  targets  in  the  Fit  for  55 
Package and in the REPowerEU Plan.  Finland's RRP 
includes  an  amendment  to  its  Climate  Act,  which 
has anchored the country's ambitious 2035 target 
into law. The phase-out of coal use in energy and 
a  reform  in  energy  taxation  will  help  promote 
cleaner  technologies.  The plan  supports the  green 
transition through investments of EUR 319 million 

8%5%54%33%Solid fossil fuels, peatand oil shaleGasRenewablesNuclear9%7%23%18%44%Solid fossil fuels, peatand oil shaleGasOilNuclearRenewables 
          
                                                 
Finland’s 

environmental 

protecting  biodiversity.  Between  2014  and 
investment 
2020, 
needs (61) were estimated at EUR 5.96 billion, while 
investment stood at EUR 1.39 billion, leaving a gap 
of EUR 4.57 billion, per year (see Graph A6.4) (62). 
The  gap  is  particularly  large  for  biodiversity  and 
ecosystems  –  EUR 3.65  billion  per  year.  Looking 
ahead,  Finland  would  need  to  cater  for  higher 
financing  needs  on,  e.g.  protecting  and  restoring 
ecosystems,  preventing  waste,  and  drinking  water 
and  sanitation.  Furthermore,  Finland  needs  more 
effective  measures  to  reduce  chemical  and 
nutrient  pollution  on  surface  water,  including 
through  better  integrating  related  objectives  into 
other policy areas (agriculture, transport, energy). 

Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a. 2014-2020 

Source: European Commission. 

In  view  of  the  expected  impacts  of  climate 
change, Finland’s climate adaptation policies 
are not up to date. In a warming climate, Finland 
might  be  more  prone  to  infrastructure  damage 
from increased rainfall. Furthermore, it will have to 
adapt 
in 
particular  to  periods  of  drought,  wildfires  and 
pests. The sectors particularly at risk from climate 
impacts 
include  biodiversity,  housing,  energy, 
coastal  protection,  forestry,  fish  farming,  reindeer 
herding,  game  management,  health,  tourism, 
transport,  and  water  management  (for  the  latter, 

forest  management  practices, 

its 

(61)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Finland) 

(62)  When also accounting for needs estimated at EU level only 

(e.g. water protection, higher circularity, biodiversity strategy). 

36 

adaptive  capacity is  considered  high).  While  some 
sectors have so far benefited from climate change 
(e.g.  lower  heating  costs,  faster  growing  forests, 
extended  growing  season  for  crops),  risks  and 
adaptation  needs  have  not  always  been 
recognised.  More  proactive,  rather  than  reactive, 
approaches, accompanied by practical information 
and  guidance,  would  help  better  manage  the 
climate  change 
its 
climate  adaptation  plan  in  2014;  it  is  scheduled 
for update in 2024.  

impacts.  Finland  adopted 

Finland  still  provides  fossil  fuel  and  other 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 
food  and  energy  security  and  mitigating 
social  effects.  Fossil  fuel  subsidies  in  Finland 
amounted  to  EUR  1.2  billion  in  2021,  a  26% 
increase  since  2015,  which  puts  low  carbon 
alternatives  at  a  disadvantage.  Environmentally 
harmful  subsidies  have  been  identified,  via  an 
initial  assessment,  in the agriculture,  forestry  and 
fishing, electricity, gas, steam and air conditioning, 
transportation  and  storage,  mining  and  quarrying, 
supply, 
manufacturing, 
sewerage,  waste  management  and  services 
sectors.  Examples  of  such  subsidies  include  the 
energy tax relief for companies in agriculture and 
forestry  for  gas  oil,  reduced  energy  tax  rate  for 
light fuel  oil  used in mobile  machinery, excise tax 
exemption on the use of natural gas, including for 
industrial  consumers  or  the  refund  scheme  for 
industry  under  conditions (63). 
energy-intensive 
Continuing  to  map  all  environmentally  harmful 
subsidies  would  help  Finland  prioritise  candidates 
for reform. 

construction,  water 

(63)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 
of the toolbox contains detailed examples of subsidies on 
the candidates for reform. 

1264013933191607924358563,65922505001000150020002500300035004000Pollutionprevention andcontrolWater (industries,excl. protection)Circular Economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
          
                                                 
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

37 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp33.9-11%-12%-13%-17%--50.0%-19-16Net carbon removals from LULUCF (2)kt CO2eq-28,448-11,023-1,799-6,716-9,113487-17754n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%29%41%41%43%44%43%51%Energy efficiency: primary energy consumption (3)Mtoe33.632.332.832.129.931.534.8Energy efficiency: final energy consumption (3)Mtoe25.225.325.825.423,,324.824.9201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP3.13.02.92.82.72.52.42.22.2Environmental taxes (% of total taxation) (4)% of taxation 7.16.96.96.66.55.85.95.65.5Government expenditure on environmental protection% of total exp.0.40.40.40.40.40.41.71.61.6Investment in environmental protection (5) % of GDP0.30.30.30.2-0.40.40.4Fossil fuel subsidies (6)EUR2021bn0.91.01.01.21.21.253.050.0-Climate protection gap (7) score 1-40.70.81.5Net greenhouse gas emissions1990 = 10082.079.081.077.068.067.076.069.072.0Greenhouse gas emission intensity of the economykg/EUR'100.320.300.300.280.25-0.310.300.26Energy intensity of the economykgoe/EUR'100.170.170.170.160.16-0.110.11-Final energy consumption (FEC)2015=100104.0104.6106.5105.196.5102.7102.994.6-FEC in residential building sector2015=100107.9116.4114.9113.7106.7121.4101.3101.3106.8FEC in services building sector2015=100105.6108.1112.5110.1101.4112.4100.194.4100.7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'101.040.970.900.880.73-0.930.86-Years of life lost due to air pollution by PM2.5per 100.000 inh.45.119.688.233.712.4-581.6544.5-Years of life lost due to air pollution by NO2per 100.000 inh.18.513.325.817.71.5-309.6218.8-Nitrates in ground watermg NO3/litre------21.020.8-Terrestrial protected areas% of total9.915.0-13.213.213.326.226.426.4Marine protected areas% of total10.0--11.0-11.010.7-12.1Organic farming% of total utilised agricultural area10.511.413.113.513.916.18.59.1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0.40.61.74.410.316.15.48.910.7Number of AC/DC recharging points (AFIR categorisation)---394148375711188626330028432518Share of electrified railways%55.456.256.256.256.256.656.6n/a56.6Hours of congestion per commuting driver per year18.118.418.318.8n/an/a28.7n/an/aMobilityFiscal and financialindicatorsEnergyPollutionBiodiversityClimate'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetFinlandEU 
 
  
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

the 

involved 

Finland  has  been 
in  various 
initiatives  for  closer  regional  cooperation 
aimed  at  accelerating 
roll-out  of 
offshore  wind  energy,  setting  generation 
capacity goals and looking into the potential 
for  decarbonising 
its  gas  system  by 
integrating renewable and low-carbon gases. 
This  Annex (64)  sets  out  actions  carried  out  by 
Finland  to  achieve  the  REPowerEU  objectives, 
including  through  the 
its 
recovery  and  resilience  plan,  in  order  to  improve 
energy 
affordability  while 
accelerating  the  clean  energy  transition,  and 
contributing to enhancing the EU’s competitiveness 
in the clean energy sector (65).  

implementation  of 

security 

and 

Diversifying  Finland’s  gas  supply  is  no mean 
feat,  but  the  country  has  strengthened  its 
security of supply through the Inkoo floating 
storage  and  regasification  unit  (FSRU).  The 
Memorandum  of  Understanding  signed  in  2022 
between 
guarantees 
cooperation  and  contains  an  agreement  to  rent  a 
FSRU for a period of ten years in either of the two 
countries, assessed as of significant importance in 
Annex 3 to the REPower Communication. 

Estonia 

Finland 

and 

The commissioning of the Baltic connector in 
2019  effectively  ended  Finland’s  isolation, 
connecting  its  grid  to  the  EU  gas  grid  and 
ensuring  the  entire  region’s  security  of 
supply.  In  conjunction  with  other  key  Projects  of 
Common  Interest  (PCIs)  in  the  Baltic  region,  the 
Baltic  connector  has  helped  decrease  Finland’s 
dependence on Russian gas in a region historically 
dependent on a single supplier. In cooperation with 
Estonia and in agreement with the Baltic countries, 
Finland  leased  an  additional  liquefied  natural  gas 
terminal  to  meet  the  additional  short-term  gas 
needs  of  the  Baltic  region.  This  ties  in  with  its 
policy  of  phasing  out  fossil  fuels  by  2035  but 
comes  with  a  risk  of  importing  liquefied  natural 
gas  (LNG)  originating  from  Russia  until  then.  

(64)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty and protect the 
most vulnerable ones, by Annex 9 as the transition to a 
circular economy will unlock significant energy and resource 
savings, further strengthening energy security and 
affordability, and by Annex 12 on industry and single market 
complementing ongoing efforts under the European Green 
Deal and REPowerEU. 

(65)  in line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

38 

Finland imported 264,65 million cubic meters LNG 
from Russia in 2022. Over the period August 2022 
– March 2023, 56% of gas consumption has been 
saved  in  (country)  compared  to  the  previous  5-
years average. 

Graph A7.1: Share of gas consumption per sector, 
2021 

Source: Eurostat 

Graph A7.2: Gas consumption per industrial sector, 
2021 (% of total gas consumption in industry) 

Source: Eurostat 

In  the  Baltic  Sea  region,  the  commissioning 
of  electricity  PCIs  between  Finland,  Sweden 
and  Poland  and  the  Baltic  countries  has 
already made it possible to end the isolation 
of the Baltic countries and couple the Nordic 
market with the Baltic electricity market. The 
commissioning of the third interconnector between 
Finland and Sweden (the Aurora Line) in 2025 will 
help  increase the  security  of  Finland’s  supply  and 
further  integrate  it  into  the  Nordic  electricity 
system. It will  also make it possible  to better use 
balancing  power  and  reserves  in  Finland  and 
Sweden,  further  contributing  to  the  integration  of 
renewable  energy  sources  into  the  Nordic  and 
Baltic  systems.  Given  the  expected  generation 

61.6%34.3%1.1%1.4%1.5%0.1%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery0.0%10.0%20.0%30.0%40.0%50.0%60.0%Iron and steelChemical and petrochemicalNon-ferrous metalsNon-metallic mineralsTransport equipmentMachineryMining and quarryingFood, beverages and tobaccoPaper, pulp and printingWood and wood productsConstructionTextile and leatherGas consumption per industrial sector (% of total gas consumption in industry) 
 
                                                 
      
 
   
 
 
capacity 
for  both  onshore  and  offshore 
renewables,  a  fourth  interconnection  is  being 
planned  with  Sweden  to  increase  cross-border 
flows  and  trade  between  the  two  countries  and 
support the convergence of electricity prices. 

Graph A7.3: Finland’s retail energy prices for 
industry (top) and households (bottom) 

energy  used  are  bioenergy,  fuels  from  forest 
industry side streams and other wood-based fuels, 
hydropower,  wind  power  and  ground  heat. 
Finland’s deployment of renewable energy reached 
a total of 12.1 GW in 2022, a 26% increase from 
2021.  Most  of  this  growth  was  in  solar  (+39%) 
and  wind  energy  (+72%). (66)  Renewable  energy 
sources represented about 46% in total gross final 
energy  consumption  in  2021  and  the  aim  set  in 
the national energy and climate plan up to 2030 is 
to  increase  the  use  of  renewable  energy  sources 
to  over  50%  during  the  2020s.  In  2021,  54%  of 
renewable 
electricity  production  came 
energy.  The  key  target  in  promoting  renewable 
energy is to reduce greenhouse gas emissions and 
move  away  from  an  energy  system  based  on 
fossil fuels.  

from 

is 

renewable  energy  and 

Bioenergy plays  a key role  in  the  production 
of 
largely 
into  the  forestry  and  forest 
integrated 
industries.  In  2021,  wood  fuels,  representing 
30%  of  total  energy  consumption,  were  the  most 
used  energy  source.  Most  wood  fuels  are  by-
products  of  the  forest  industry,  including  black 
liquor  derived  from  the  pulp-making  process  and 
bark,  sawdust  and  other  industrial  wood  residues. 
Logging  residues  and  other  low-value  biomass 
from  harvesting  operations  are  also  used  to 
generate energy. Bioenergy is also generated from 
biodegradable  waste  and  side  streams  of 
agriculture  and  industrial  production  and  from 
municipal  waste.  The  advanced  biofuels  sector  is 
in  its  infancy,  with  the  number  of  commercial 
plants  still  quite  low.  The  EU  is  the  world  leader 
here,  with  19  out  of  24  operational,  commercial 
advanced biofuels plants, with Sweden and Finland 
having  the  highest  number  (12).  For  2017-2019, 
Finland  is  third  in  this  area,  after  the  US  and 
France, with 69 high-value patent applications. 

Wind  and  geothermal  energy  are  being  used 
more  and  more  as  renewable  sources.  Wind 
power  construction  in  Finland  began  later  than  in 
many other EU countries. However, in recent years 
it  has  gained  momentum,  with  national 
construction  and  production  statistics  setting  new 
records year after year. At the end of 2021, there 
were 962 wind turbine generators installed, with a 
combined  capacity  of  3 257  MW,  generating  less 
than  10%  of  Finland’s  electricity  consumption  in 
2021.  Geothermal  energy  has  come  on  in  leaps 
and  bounds  over  the  past  5  years.  A  heat  pump 

(1) On electricity, the band consumption is DC for households 
and ID for industry 
(2) On gas, the band consumption is D2 for households and I4 
for industry  
(3) No data available on retail gas price for industry before 
Q1-2021 
Source: Eurostat 

During the first half of 2022, Finland’s retail 
gas  prices  for  industry  were  almost  double 
the  EU  average,  while  being  way  below  the 
EU  average  for  electricity.  For  households, 
electricity  prices  remained  considerably  below  the 
EU average. In December 2022, Finland announced 
additional  measures  to  help  citizens  cope  with 
their increased electricity  bills and decided on the 
aid to be offset against the bills during the winter 
months.  In  the  aftermath  of  supply  cuts  and  the 
phase-out of energy supplies from Russia, Finland 
introduced  additional  energy  efficiency  measures. 
The  measures  to  phase  out  oil  and  gas  use  in 
buildings  were  complemented  by  a  nationwide 
information  campaign,  ‘Down  a  degree  to  ensure 
energy for all households’.  

Finland  is  one  of  the  EU-27  leaders  in 
renewable energy. The main forms of renewable 

(66)  IRENA, Renewable capacity statistics 2023 

39 

050100150200250300€/MWhElectricity FinlandElectricity EU050100150200250€/MWhGas FinlandGas EUElectricity FinlandElectricity EU 
   
                                                 
boom  started  with  air-coupled  heat  pumps,  which 
are still popular and remain the most sold. But the 
trend is shifting more and more to ground source 
heat pumps both in small-scale/residential use and 
in  large-scale  projects.  Geo-energy  is  expected  to 
become  an  even  greater  share  of  renewable 
energy in the years to come.  

Solar  electricity  plays  a  growing  role, 
especially  where  on-site  energy  generation 
substitutes  energy  bought  from  the  grid. 
Solar  heating  is  used  to  supplement  the  main 
heating  system.  Despite  its  northern  location, 
annual  solar  heat  production  in  Finland  is  only 
about 20% less than that of northern Italy. Annual 
irradiation levels are the same as in Germany. The 
main  technical  challenges  for  Finland  are  related 
to the intermittency of available solar energy (day-
night  and  summer-winter  cycles),  particularly  in 
the  north.  Finland’s  share  of  solar  power 
generation  doubled  in  2020,  but  is  still  a  small 
part of its total power generation. 

To tackle the problem of lengthy permit and 
appeal  processes  for  renewable  energy 
projects,  the  government  proposed  a  law 
creating  a  temporary  fast-track  system  for 
environmental  and  water  permit  procedures 
and  certain  appeal  processes  for  projects 
that  are  compliant  with  the  DNSH  principle. 
The  law  entered  into  force  1st  of  January  2023 
with  the  Parliament’s  approval.  The  fast-track 
system  is  proposed  to  apply  to  permit  processes 
that are pending in the national environmental and 
water  permit  authority  between  2023  and  2026, 
the 
to  appeal  processes  pending 
and 
administrative courts between 2023 and 2028. 

in 

Finland  has  a  strong  industry  for  wind, 
components for batteries and grids, and is a 
leader  in  biofuels.  In  total  the  EU  has  1.24 
Million  jobs  in  RES  sector  in  2022 (67)  which  in 
relation  to  total  working  population  in  the  EU (68) 
means an average of 0,67% of all jobs are in the 
RES  sector  while  in  2021  Finland  had  a  total  of 
24.000 (69)  people  working 
in  the  renewable 

(67)  https://www.irena.org/Publications/2022/Sep/Renewable-

energy  sector,  which  represents  0,96%  of  all 
jobs (70).  Most  of  these  jobs  are  in  Solid  Biomass 
(12.600  or  52%)  and  Wind  energy  (6.900  or 
29%) (71). 

is 

the 

largest 
sector 
The  bioenergy 
renewables  employer  on  the  continent.  Solid 
biomass  (for  heat  and  electricity)  leads,  with 
approximately 314 000 in the EU-27, of which ca. 
4% are in Finland (i.e. 3 times higher (72)  than EU 
average in this sector). It is also in the top 10 for 
renewable  energy,  with  over  40%  of  renewable 
energy  jobs  in  manufacturing.  It  is  a  leading 
transformer  manufacturer  and  ranks  relatively 
high 
in  the  number  of  peer-reviewed  wind 
research  and  innovation  (R&I)  articles  it  has 
published  per  year  (2010-2021):  13th  for  wind 
energy  and  9th  for  grid  integration.  The  mineral-
intensive  transition  to  clean  energy  will  require  a 
considerable  supply  of  many  critical  minerals 
In  particular  graphite,  cobalt  and 
(Annex  5). 
lithium, on the list of EU critical raw materials, and 
anode production, are a weak point, but there have 
been some positive developments recently, mostly 
in Finland and Sweden. Globally, Finland (10%) is a 
relatively  significant  producer  of  refined  cobalt, 
second  only  to  China,  and  the  cobalt  refinery  in 
Kokkola is the largest one outside of China. 

inventions 

Finland is among the main contributors in the 
EU, and globally, to hydropower-related high-
(2017-2019).  However, 
value 
investment  in  R&I  as  an  Energy  Union  priority (73) 
decreased  from  0.115%  in  2014  to  0.060%  in 
2020 (share of GDP); over a similar period (2014-
2019),  private  R&I  investment  in  Energy  Union 
priorities also decreased, from 0.239% to 0.198%. 
The  number  of  patent  families  in  Energy 
Union  priorities  increased  from  22.7  per 
million  inhabitants  in  2014  to  32.2  per 
million  inhabitants  in  2019.  Venture  capital 
investments  in  climate  tech  start-ups  and  scale-
ups  saw  a  steep  increase  between  2017  and 

(70)  There are 5,5 Million people living in Finland (as of 2021), 

and 2,5 Million people were employed: 
https://eures.ec.europa.eu/living-and-working/labour-market-
information/labour-market-information-finland_en  

Energy-and-Jobs-Annual-Review-2022  

(71)  https://www.irena.org/Publications/2022/Sep/Renewable-

(68)  189 Million in 2021: https://ec.europa.eu/eurostat/statistics-

explained/index.php?title=Employment_-
_annual_statistics#:~:text=In%202021%2C%20the%20shar
e%20of,in%20the%20remaining%208%20countries. 

(69)  https://www.irena.org/Data/View-data-by-

topic/Benefits/Renewable-Energy-Employment-by-Country  

Energy-and-Jobs-Annual-Review-2022  

(72)  Finland’s working population equals 1,3% of all EU overall 

jobs 

(73)  Renewables, smart systems, efficient systems, sustainable 

transport, carbon capture, utilisation and storage (CCUS) and 
nuclear safety, COM(2015) 80 final (Energy Union Package). 

40 

 
                                                 
                                                 
through 

relevant 

2019, jumping from only EUR 28.7 million in 2017 
to  EUR  132.4  million  in  2019.  Regarding  market 
information 
surveillance  activities,  based  on 
provided 
reporting 
the 
mechanisms, Finland is not carrying out checks on 
products  covered  by  eco-design  and  energy 
labelling. This raises serious concerns with respect 
to 
the  enforcement  of  market  surveillance 
obligations  and  the  compliance  levels  of  the 
concerned  products,  level  playing  field  among 
economic  operators,  missed  energy  and  CO2 
savings and consumer trust. 

Graph A7.4: Patent families in Energy Union R&I 
priorities 

Source: JRC SETIS (2022) 

accurate 

electricity 
real-time  power  grid 

Finland  is  a  leader  in  smart  grid  technology. 
This  is  due  to  its  early  adoption  of  related 
technologies  such  as  household-specific,  remotely 
consumption 
readable, 
metering  and 
failure 
monitoring.  This  has  led  to  improved  energy  use 
information  for  customers  and  real-time  billing. 
Finland  is  now  taking  the  next  step  in  smart  grid 
technologies  to  cater  for  the  increased volume  of 
small-scale  generation,  customer-level  energy 
storage,  electric  vehicles  and  controllable  loads. 
The aim is to put consumers at the heart of energy 
and efficiency measures. 

41 

17%10%6%32%36%47%27%29%27%24%24%19%0%1%0%201020142019[% per priority]CCUSNuclear safetySustainable transportEfficient systemsSmart systemRenewables122195178Total 
   
Table A7.1: Key energy indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 

Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022) 

42 

EU20182019202020212018201920202021Import Dependency [%] 45%43%43%38%58%61%57%56%of Solid fossil fuels 101%99%92%72%44%44%36%37%of Oil and petroleum products 98%95%102%95%95%97%97%92%of Natural Gas 100%101%100%100%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal 66%64%55%47%40%44%49%47%of Crude Oil89%92%84%83%30%27%26%25%of Natural Gas 98%97%67%75%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)68,59968,75767,52370,26368,65069,26772,122-Combustible Fuels25,99926,39925,03027,95925,92321,39123,672-Nuclear23,24523,20322,47722,79323,87023,29123,598-Hydro16,76915,79914,77213,30112,42115,88315,792-Wind2,3273,0684,7955,8396,0258,2568,507-Solar 11224890147219298-Geothermal 0000000-Other Sources248266401281264227255-Net Imports of Electricity (GWh)16,33718,95120,42519,93620,04215,10417,768-   As a % of electricity available for final consumption 21%23%25%24%24%19%21% -Electricity Interconnection (%)--28.80%28.21%29.1%29.0%24.2%24.0%20152016201720182019202020212022Gas Consumption (in bcm)2.72.52.32.62.52.42.41.4Gas Imports - by type (in bcm)2.72.52.32.72.82.82.8-Gas imports - pipeline2.72.52.32.62.62.62.6-Gas imports - LNG0.00.00.00.10.20.20.2-Gas Imports - by main source supplier (in bcm) (1)Russia2.72.52.32.62.61.92.1-Estonia0.00.00.00.00.00.80.6-Lithuania0.00.00.00.00.00.10.1-Norway0.00.00.00.10.10.00.0-Netherlands0.00.00.00.10.00.00.0-2019202020212022LNG TerminalsNumber of LNG Terminals (2)0001LNG Storage capacity (m3 LNG)00068,000Underground StorageNumber of storage facilities0000Operational Storage Capacity (bcm)00002019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)28.734.0132.4n.a.as a % of total VC investments in Finland3.3%2.5%6.7%n.a.Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)165.33150.56n.a.n.a.Public R&I (% GDP)0.1%0.1%n.a.n.a.Private R&I (EUR mln)477.57n.a.n.a.n.a.Private R&I (% GDP)0.20%n.a.n.a.n.a.ELECTRICITYFINLANDENERGY DEPENDENCECLEAN ENERGYDIVERSIFICATION OF GAS SUPPLIES 
 
 
 
     
 
 
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

This  Annex  monitors  Finland’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable situations. In Finland, the number of 
workers in energy-intensive industries undertaking 
education  and  training  is  significantly  above  the 
EU  average.  Investment  in  skills,  in  line  with  the 
Council  Recommendation (74),  supports  the  fair 
transition  and  the  implementation  of  REPowerEU. 
Under Finland’s recovery and resilience plan (RRP), 
the  broad  reform  of  continuous  learning  services 
will  support  the  green  transition,  with  a  focus  on 
training  and  skills  development (75).  The  European 
Social Fund Plus (ESF+) will support investment in 
re- and upskilling, including in green skills. 

The green economy is expanding, but workers 
in  declining  activities  need  active  support. 
The  greenhouse  gas  emissions  intensity  of  the 
workforce  declined  from  20.7  to  16.1  tonnes  per 
worker  between  2015  and  2021,  while  remaining 
above  the  EU  average  of  13.7  tonnes  (see 
in 
Graph A8.1  and  Table A8.1).  Employment 
energy-intensive  industries  represented  a  stable 
share  of  2.2%  of  total  employment  in  2021  (in 
2020:  2.2%  vs.  3.0%  in  the  EU).  Employment  in 
mining  and  quarrying  has  increased  by  16.9% 
since  2015,  but  reducing  the  use  of  peat  for 
energy by at least 50% by 2030 will likely lead to 
employment  shifts  in  peat  extraction  and  related 
sectors. Total jobs in the environmental goods and 
services sector grew by 3.7% during 2015-19 (EU: 
+8.3%),  reaching  5.1%  of  total  employment, 
significantly  above  the  EU  average  (see  Annex  9 
for  circular  jobs  specifically).  According  to  recent 
estimates (76), the green transition will create more 
than  11 500  jobs  in  processing  and  3 100  in 
primary  production  by  2030,  while  job  losses  are 
expected  in  services.  The  job  vacancy  rate  in 
construction, which is key for the green transition, 
stood at 2.5% in 2022 (against the EU average of 
4.0%) (77).  

Graph A8.1: Fair transition challenges in Finland 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1). 

In 

sectors. 

reskilling 

the  employment 

Significant  investment is  planned to  support 
up-  and 
in  declining  and 
transforming sectors. Skills are key for smooth 
labour  market  transitions  and  preserving  jobs  in 
transforming 
energy-intensive 
industries,  workers’  participation  in  education  and 
training  broadly  remained  stable  between  2015 
and  2022,  and  at  20%  was  well  above  the  EU 
average  (10.4%).  In  Finland,  29%  of  citizens 
believe  they  do  not  have  the  necessary  skills  to 
contribute  to  the  green  transition  (EU:  38%) (78). 
The continuous learning reform outlined in the RRP 
addresses 
the 
transition by strengthening green and digital skills. 
At  least  20%  of  the  investment  in  training  is 
targeted  at  the  green  and  digital  transitions,  with 
5%  specifically  for  the  transition  to  a  carbon-
neutral society. The Territorial Just Transition Plans 
will facilitate the phasing out of peat production in 
Finland  with  the  support  of  the  Just  Transition 
Fund 
social, 
employment  and  skills  impacts  and  proposing 
specific measures to address them. In Finland, the 
JTF aims to halve the energy use of peat by 2030. 
A total of EUR 465 million will be invested through 
the JTF. In Finland, approximately 11% of the total 
ESF+  funding  (EUR  604.7  million)  contributes  to 
green skills and jobs.  

(JTF),  while 

impact  of 

considering 

the 

(74)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality (2022/C 243/04) covers 
employment, skills, tax-benefit and social protection 
systems, as well as essential services and housing. 

(75)  See 2022 Country Report (Annex 6). 

(76)  Medium-term Climate Change Policy Plan 

(77)  Eurostat (JVS_A_RATE_R2) 

Energy  poverty  indicators  are  at  a  good 
level,  having  improved  slightly  in  recent 
years. The share of the population unable to keep 
their homes adequately warm declined from 1.7% 

(78)  Special Eurobarometer 527. Fairness perceptions of the 

green transition (May – June 2022). 

43 

00.511.522.5GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestFI Latest (vs EU Latest)FI 2015 (vs EU Latest) 
 
                                                 
  
                                                 
 
Table A8.1: Key indicators for a fair transition in Finland 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID). 

in 2015 to 1.3% in 2021 (79). In particular, 4.1% of 
the  population  at  risk  of  poverty  (AROP)  were 
affected  in  2021  (EU:  16.4%  in  2021),  as  were 
1.4%  of  lower  middle-income  households  (in 
deciles  4-5)  in  2021  (EU:  8.2%  in  2021).  Before 
the energy price hikes, an estimated 13.5% of the 
total  population  and  38.9%  of  the  (expenditure-
based) 
residential 
population 
expenditure  budget  shares  on  electricity,  gas,  and 
other  fuels (80)  above  10%  of  their  household 
budget,  which  are  below  the  estimated  EU 
averages of 26.9 and 48.2%, respectively.  

AROP 

had 

The  increased  energy  prices  in  2021-2023 
are  negatively  affecting  household  budgets, 
in  particular  for  low-income  groups.  As  a 
result of price changes during the August 2021 to 
January  2023  period  relative  to  the  18  months 
prior  (see  Annex  7),  in  the  absence  of  policy 
support  and  behavioural  responses,  the  share  of 
individuals living in households which spend more 
than  10%  of  their  budget  on  energy  would  have 
increased by 7.6 pps for the whole population and 
by  6.3  pps  among  the  (expenditure-based)  AROP 
population,  which 
less  than  the  EU-level 
increases  (16.4  and  19.1 pps,  respectively) (81). 
Expenditure  shares  of 
lower-middle 
income groups for electricity would have increased 
the  most,  as  shown  in  Graph A8.2.  Among  the 
(expenditure-based)  AROP  population,  individuals 
living in households with budget shares for private 
fuels (82)  above  6%  would  have 
transport 
increased (6.6 pps vs. 5.3 pps), still standing below 
the  EU  average  in  January  2023  (23.8%  vs. 

low  and 

is 

(79)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

(80)  Products defined according to the European Classification of 
Individual Consumption according to Purpose (ECOICOP): 
CP045. 

37.9%).  According  to  a  recent  study (83),  48%  of 
people  living  in  an  owner-occupied  dwelling  had 
already  reduced  their  energy  consumption  due  to 
rising energy costs. The RRP includes measures to 
renewable  energy, 
boost 
decarbonise 
reduce  emissions  from 
buildings and promote low-emission transport. 

the  generation  of 
industry, 

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

Access to public transport displays an urban-
rural  divide.  Around  half  of  the  population 
perceive public transport to be relatively available 
(48% vs 55% in the EU), affordable (51% vs 54%), 
while 63% consider transport to be of good quality 
(vs  60%  in  the  EU).  Rural  areas  perform  worse 
than  urban  areas,  in  particular  regarding  their 
perception  on  transport  availability  (24%  vs  46% 
in the EU) (84). The average carbon footprint of the 
top 10% emitters among the population in Finland 
is about 4.9 times higher than that of the bottom 

(81)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

(83)  Nordea study – survey conducted in August 2022.  

technical brief. 

(82)  ECOICOP: CP0722. 

(84)  EU (rural): 46%, 48% and 56% respectively. Special 

Eurobarometer 527. 

44 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10FI GasFI ElectricityEU GasEU ElectricityIndicatorDescriptionFI 2015FI LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes20.716.2 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %2.22.2 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %23.420 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %1.71.3 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %17.223.8 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters4.84.9 (2020)5 (2020) 
                                                 
   
                                                 
 
  
 
50%  (see  Graph  A8.1),  slightly  less  pronounced 
than the EU average (5.0 times).  

45 

 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

promoting a circular economy (86).  In March 2022, 
Finland  adopted  a 
revised  national  waste 
management  plan (87)  for  the  mainland  (Åland 
islands excluded) that runs until 2027. 

Finland’s  waste  management  performance 
has  stagnated  for  the  past  several  years. 
Finland  missed  the  EU’s  2020  50%  municipal 
waste  recycling  target.  Finland  with  a  37.1% 
recycling  rate  in  2021  is  at  risk  of  missing  the 
subsequent  2025  55%  municipal  waste  recycling 
target. Finland has made considerable progress in 
curbing  its  landfill  rate  over  recent  years,  but  did 
so  by  increasing  incineration  capacity.  Finland 
needs  to  improve  separate  waste  collection  rates 
and  subsequent  recycling  rates,  and  reduce  its 
reliance on incineration (see Graph A9.2). 

Graph A9.2: Treatment of municipal waste 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic benefits (85). It spurs job growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

Finland is on track to meet the EU’s circular 
economy goals, although improvement is still 
needed on the circular material use rate and 
material  footprint.  The  2020  EU  circular 
economy  action  plan  (CEAP) aims  at  doubling  the 
circular  material  use  rate  between  2020  and 
2030.  In  2021,  the  circular  material  use  rate  in 
Finland was 2%, which compared to the EU 2021 
average  of  11.7%  shows  that  there  has  been 
limited progress over the last few years. The CEAP 
also  aims  to  significantly  decrease  the  EU’s 
material  footprint.  In  2020,  Finland’s  material 
footprint (33.6 tonnes per capita) was much higher 
than the EU average (13.7 tonnes per capita) (see 
Graph A9.1).  

Graph A9.1: Trend in material use 

Source: Eurostat 

The industrial system in Finland is inefficient 
in 
on  resource  productivity.  The  economy 
Finland,  particularly  industry  (e.g.  mining  and 
extraction),  is  not  efficient  at  using  materials  to 
produce  wealth.  In  2021,  Finland  generated  1.0 
(purchasing  power  standard)  per  kg  of 
PPS 
material  consumed,  putting  Finland’s  resource 
productivity well below the EU average of EUR 2.3 

(86)  Government Resolution on The Strategic Programme For 

Circular Economy. 

(87)  Kierrätyksestä kiertotalouteen. Valtakunnallinen 

jätesuunnitelma vuoteen 2027 (valtioneuvosto.fi) 

Source: Eurostat 

Finland’s  recently  adopted  circular  economy 
policies  are  yet  to  translate  into  positive 
results  on  the  ground.  In  2019,  the  Finnish 
Innovation Fund Sitra updated its roadmap on the 
circular economy, introducing 30 new actions, and 
it  adopted  the  resolution  on 
in  April  2021 

(85)  A new Circular Economy Action Plan (europa.eu). 

46 

0.020.040.060.080.0100.0120.00.05.010.015.020.025.030.035.040.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Finland (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Finland (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita)5045105515666096090100200300400500600700201620172018201920202021Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27 
 
 
            
                                                 
         
                                                 
 
Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the 
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material 
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes 
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households.  
Source: Eurostat, European Environment Agency 

fully 

implement 

PPS/kg  (see  Annex  5).  It  is  paramount  for  Finland 
to 
its  sustainable  growth 
programme, which has earmarked EUR 110 million 
to  Business  Finland  in  the  search  for  circular 
economy  solutions  for  industry,  especially  mining 
and extraction. 

The  built  environment  system  represents  a 
challenge in Finland. The 2020 recovery rate for 
construction  and  demolition  waste  was  much 
lower  (63%)  than  the  EU  average  (89%).  As 
regards  soil  sealing,  the  index  measured  in  2018 
has  increased  since 2016  and  approaches  the  EU 
average.  There  is  scope  for  renovating  existing 
buildings  and  increasing  the  share  of  secondary 
raw  materials.  Finland  needs  to  step  up  action 
accordingly and ensure that relevant schemes (e.g. 
funding for circular construction R&D projects) are 
effectively  implemented  into  land-use  planning 
and the real estate industry. 

The  agri-food  system  in  Finland  is  becoming 
more circular. In 2021, Finland’s composting and 
anaerobic  digestion  has  slightly  decreased  from 
the  previous  two  years  to  76 kg/capita  and 
remains  below  the  EU  average  (100  kg/capita). 
Increasing  anaerobic  digestion  enhances  Finland’s 
energy  security  by  generating  biomethane  and/or 
organic  fertilisers.  It  is  noteworthy  that  in  2022 
the  food  industry  renewed  the  commitment  to 

material efficiency with the restaurant sector now 
included to decrease food waste generation. 

There remains a financing gap in the circular 
including  waste  management.  
economy, 
Additional investments are required to address the 
implementation  gap  and  identified  needs.  The 
financing  gap  was  estimated  at  EUR  463  million 
per  year  between  2014  and  2020.  Over  this 
period, investment needs were estimated to be at 
least  EUR  856  million  per  year  while  investment 
baselines  were  EUR  393  million  per  year  (see 
Annex  6).  For  Finland,  investment  areas  such  as 
eco-design, repair, reuse and remanufacturing will 
be  necessary  to  reach  EU’s  circular  economy 
objectives.  Additional 
investments  are  also 
necessary to improve separate collection of waste 
and  additional  waste  recycling  infrastructure  to 
divert  recyclable  waste  from  incineration.  Finland 
still needs to invest an additional EUR 289 million 
(around EUR 41.3 million per year) between 2021 
and  2027  to  meet  the  recycling  targets  for 
municipal waste and packaging waste (88). 

(88)  Study on investment needs in the waste sector and on the 

financing of municipal waste management in Member States 
- Publications Office of the EU (europa.eu) 

47 

AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)31.432.635.332.633.6-13.72020YoY growth in persons employed in the circular economy (%)1-5.2 -4.2 ----2.92019Water exploitation index plus (WEI+) (%)1.20.91.41.4--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)1.01.01.01.11.01.02.32021Circular material use rate (%)25.35.65.96.35.92.011.72021Recycling rate (% of municipal waste)42.140.542.343.542.137.149.62021Built environmentRecovery rate from construction and demolition waste (%)387.0-74.0-63.0-89.02020Soil sealing index (base year = 2006)4103.7-107.7---108.32018Agri-foodFood waste (kg per capita)5----116.0-131.02020Composting and digestion (kg per capita)65.067.072.080.080.076.0100.02021 
                                                 
 
      
 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Finland’s  performance  on  digital  skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP). Finland allocates EUR 0.5 billion of its total 
RRP budget to digital (89). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (90).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (91). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (92). 

Finland 
is  among  the  best  performing 
countries  in  digital  skills  on  most  of  the 
indicators, 
ICT 
specialists  and  the  proportion  of  female  ICT 

including  basic  digital  skills, 

(89)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(90)  The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(91)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(92)  The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

specialists. Given the size and relevance of the ICT 
ICT-skilled 
in  the  economy,  the  demand  for 
workers is high and companies report difficulties in 
hiring (93).  Finland 
several 
measures,  including  activities  to  increase  the 
intake of students in digital technologies. But there 
room  for  additional,  complementary 
is  still 
measures 
ICT 
specialists. 

the  number  of 

implementing 

increase 

to 

is 

for 

the 

indicators 

Finland is broadly in line with the EU average 
on 
digital 
infrastructure/connectivity.  But  due  to  the 
features of its sociogeography (large but sparsely 
populated  territory), 
it  scores  below  the  EU 
average on the very high capacity network (VHCN) 
and fibre to the premises (FTTP) coverage. On the 
other  hand,  in  overall  5G  coverage  it  scores  well 
above  the  EU  average  (95%  vs  EU  81%).  5G 
coverage on the 3.4-3.8 GHz spectrum band, which 
is  essential  for  enabling  advanced  applications 
requiring large spectrum bandwidth is 84%, is also 
much higher than the EU average of 41%. 

Finland  excels  on  the  digitalisation  of 
businesses, with all indicators significantly above 
the EU average for SMEs with at least a basic level 
of  digital  intensity,  enterprises  using  big  data 
solutions  and,  especially,  in  the  use  of  cloud 
services and artificial intelligence. 

public 

country 

of 
for  online 

the 
Finland  performs  very  well  on 
digitalisation 
The 
services. 
possibilities 
interaction  between 
government  authorities  and  the  public  -  for 
citizens  as  well  as  for  businesses  -  approach 
saturation  and  for  businesses,  the  Digital  Decade 
target  is  already  reached. 
In  the  access  to 
electronic health records, it scores 89 out of 100, 
much  higher than  the  EU  average  which  is  at  71.  
The 
the 
implementation  of  a  new  digital  identity  system 
that will serve also as a certified identification tool 
in  the  meaning  of  eIDAS  Regulation.  By  far  the 
largest  number  of  digital  measures in  the Finnish 
RRP  are  focused  on  public  services  including 
measures to support the digital transformation of 
healthcare and of public services, with a particular 
focus  on  data-driven  innovation,  the  exchange  of 
digital  information  and  the  use  of  public  sector 
data. 

finalizing 

currently 

is 

(93)  Source: Eurostat – European Union Survey on ICT Usage and 

eCommerce in Enterprises 

48 

 
 
                                                 
                                                 
 
Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.   

Source: Digital Economy and Society Index 

the  government 

Being  at  the  cutting  edge  of  ICT  technology  and 
policy, 
the 
Parliament  a  report  on  National  Digital  Compass 
based  on  EU  Digital  Decade  Policy  Programme  in 
September 2022 and actively seeks to harness the 
the  Finnish  digital  economy.
potential  of 

submitted 

to 

49 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA79%79%54%80%% individuals2021202120212030ICT specialists (1)7.6%7.4%7.4%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage67%68%71%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)38%40%50%56%-% households20202021202220222030Overall 5G coverage12%72%95%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA84%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA90%69%90%% SMEs202220222030Big data (3)22%22%22%14%75%% enterprises20202020202020202030Cloud (3)NA66%66%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA16%16%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA909277100Score (0 to 100)2021202220222030Digital public services for businessesNA9310084100Score (0 to 100)2021202220222030Access to e-health recordsNANA8971100Score (0 to 100)202320232030Finland 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance  of  Finland’s  research  and  innovation 
system,  which  is  essential  for  delivering  the  twin 
green and digital transition. 

Lack  of  significant  improvements  in  the 
dynamics  of  total  factor  productivity  is 
partially explained by lower spending on R&D 
as  compared  to  the  period  before  2010. 
Finland  set  an  aim  to  increase  R&D  spending  to 
4.0%  of  GDP (94)  as  compared  to  actual  spending 
of  3.0%  of  GDP  in  2021  and  3.7%  in  2009. 
requires  a  clear 
Achieving 
commitment  from  the  government  concerning 
public  investment  in  R&D,  better  coordination  of 
support  between  the  agencies  administrating 
grants for R&D, and a higher supply of R&D labour 
force (95). 

the  4.0% 

level 

Graph A11.1: R&D intensity in % of GDP, 2021 

Source: Eurostat 

Finland’s R&D intensity (96) has been steadily 
increasing  since  2018,  but  business  R&D 
needs  a  boost  to  reach  the  national  R&D 
target.  R&D  intensity  reached  2.99%  of  GDP  in 
2021, increasing from 2.91% in 2020, but still far 
from its ambitious national target of 4.0% of GDP 

(94)  According to OECD Working Paper 2021/08 ‘Targeting R&D 
intensity in Finnish innovation policy’ the first target of 1.7% 
for 1980 was set in 1973 and climbed up to 4% target set in 
2005. Finland’s R&D intensity grew steadily from 1981 
(1.15% of GDP) and reached a peak in 2009 (3.73% of GDP). 

(95)  OECD (2022), OECD Economic Surveys: Finland 2022, OECD 

Publishing, Paris,  

https://doi.org/10.1787/516252a7-en  

(96)  Defined as gross domestic expenditure on R&D as a 

percentage of GDP); European benchmark target for R&D 
intensity is 3% of GDP. 

some 

leaders 

innovation 

by  2030.  In  terms  of  business  R&D,  Finland  is 
(Belgium, 
behind 
Denmark  and  Sweden).  Business  R&D  investment 
has grown in the past year from 1.84% of GDP in 
2019 to 2.06% in 2021, recovering from the sharp 
decrease in the previous decade due to the decline 
of Nokia’s role in the national R&D system.  

Public  support  for  business  innovation  is 
strengthening.  Historically,  Finland  has  not  had 
particularly  strong  financial  R&D  incentives  for 
businesses. However, in 2021 a 50% tax deduction 
was  introduced  for  costs  of  R&D  projects  carried 
out in collaboration with universities and research 
institutes.  The  incentive  has  since  been  tripled  so 
that  between  2022  and  2027  companies  will  be 
able to receive a 150% tax deduction. This should 
help  strengthen  public  support  for  business 
enterprise  expenditure  on  R&D,  which  was  still 
relatively  weak  in  2019  at  0.066%  of  GDP,  three 
times less than the EU average of 0.196% of GDP. 

The  recovery  and  resilience  plan  (RRP)  is 
expected  to  help  boost  public  support  for 
business R&D with investments in innovation 
ecosystems,  research 
infrastructure  and 
piloting.  The  objective  of  the  R&D  component  is 
to  contribute  to  strengthening  R&D  intensity.  The 
amount  of  Recovery  and  Resilience  Facility  funds 
allocated  to  R&D  and  innovation  is  estimated  at 
EUR 367 million 
(around  17.5%  of  the  RRP). 
Locomotive  companies  selected  by  Business 
Finland,  such  as  Valmet,  Borealis  Polymers,  ABB, 
and  Meyer  Turku  have  each  been  allocated 
EUR 20 million  to 
lead  a  specific  ecosystem 
assembled  by  research  organisations  and  SMEs 
developing green technologies. 

is 

innovation 

Finland  has  one  of  the  world’s  highest 
proportions  of  active  innovators  and  its 
technological 
recovering.  
According  to  latest  EIB  Investment  Survey  in 
2022 (97), the share of active innovators in Finland 
was 52% of firms, nearly as high as in the US. In 
addition, 
innovation, 
measured  by  patent  applications,  reversed  its 
downward  trend  of  the  past  two  decades  and 
Finland  now  ranks  among  the  top  performers  in 
Europe.  Notwithstanding  this  positive  outlook, 
science-business 
linkages  could  be  stronger. 
According to the OECD, ‘there is a broadening gap 
industry  –  as  the 
between  universities  and 

technological 

in  2020, 

(97)  https://www.eib.org/en/publications/20220219-econ-eibis-

2022-eu 

50 

00.511.522.5BEDKNLFISEEUPublicBusiness 
 
  
                                                 
                                                 
 
autonomy  of  universities  made  them  focus  on 
becoming  internationally  competitive  in  science 
and  put  less  emphasis  on  and  establish  fewer 
incentives  for  industry  cooperation’.  To  improve 
the  situation,  the  country  could  move  towards  a 
more  adaptive  innovation  policy  and  a  more 
responsive  system,  with  enhanced  flexibility  and 
rapid decision-making to address disruptions in the 
global  context (98).  The  OECD 
recommended 
redesigning  governance  to  generate  a  whole-of-
government policy for innovation-enabling system 
transitions. 

Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data. 
(98)  OECD Reviews of Innovation Policy: Finland 2017. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPQ’s Patent Statistical database), Invest Europe 

51 

R&D intensity (gross domestic expenditure on R&D as % of GDP)3.712.872.802.912.992.26Public expenditure on R&D as % of GDP1.100.940.940.940.910.76Business enterprise expenditure on R&D (BERD), % of GDP2.581.911.841.952.061.49Scientific publications in top 10% most cited publications worldwide as % of total publications of the country 11.311.312.2::9.8PCT patent applications per billion GDP (in PPS)9.97.86.9::3.3Public-private scientific co-publications as % of publications12.612.312.111.811.87.1Public expenditure on R&D financed by business, % of GDP0.0760.0460.039::0.054New graduates in science & engineering per thousand population aged 25-3423.817.817.618.4:16Total public sector support for BERD as % of GDP0.0740.0810.066::0.194Share of environment-related patents in total patent applications filed under PCT (%)14.714.616.4::13.3Venture capital (market statistics) as % of GDP0.0620.0580.0930.1340.2090.074Employment in fast-growing enterprises in 50% most innovative sectors3.45.07.6::5.52019EU average (1)2021Finance for innovation and economic renewal202020102015Key indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&DGreen innovation  
 
 
 
 
 
 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

The 

International 

Institute 
(IMD) 

Finland offers a  good environment  for  doing 
for 
business. 
Management 
world 
Development 
competitiveness rankings (99) placed Finland 8th, up 
3 places from the previous year. The improvement 
comes  due  to  advances  in  both  government  and 
business  efficiency.  Despite  a  deterioration 
because  of 
the  general  economic  climate, 
according to the 2022 Survey on Access to Finance 
of  Enterprises  (SAFE) (100),  Finnish  SMEs  faced 
relatively  favourable  financing  conditions.  Finland 
also  has  one  of  the  best  corruption  perception 
scores in the world; and business digitalisation is a 
strength, with 88% of Finnish SMEs having at least 
a  basic  level  of  digital  intensity (compared  to the 
EU  average  of  60%).  Finland  has  a  relatively  low 
level of restrictiveness in regulated professions. 

Graph A12.1: Business environment and 
competitiveness drivers 

1.6%).  There  were  11  ongoing 
procedures (versus the EU average of 27) (101). 

infringement 

the 

real 

recent 

late  2000’s, 

Finland’s  productivity  performance  has 
stagnated.  After  impressive  productivity  growth 
labour 
until 
productivity growth has stalled. Since around 2010 
real productivity has been consistently below both 
its  regional 
the  EU  average  and  those  of 
neighbours.  After  declining  between  2019  and 
2021,  real  labour  productivity  is  forecast  to  have 
increased fractionally in 2022 (0.2%) but remains 
below  the  EU  average.  Explanations  for  this 
relatively  poor 
include 
prominent differences between manufacturing and 
services,  the  tradeable  and  non-tradeable  sectors 
(Graph  A12.2)  and  an  evident  regional  divide 
between the Greater Helsinki region and the three 
mainland Finnish regions.  

recent  performance 

Graph A12.2: Productivity by sector 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

The  Single  Market  Scoreboard  indicates  that 
Finland  performs  relatively  well  at  transposing 
and  applying  EU  law.  The  transposition  deficit 
stood at 0.8% at the end of 2021 (EU average of 

Source: European Commission 

Total factor productivity (TFP) has stalled for 
several  years  (Graph  A12.3)  and  remains  below 
that of Nordic peers. Low investment in areas that 
provide  most  support  to  productivity  growth 
(machinery  and  equipment,  including  information 
and  communication  technology  equipment  and 
intellectual  property  products)  is  hindering  the 
return to higher potential growth. 

Finland  is  an  innovation  leader (102),  scoring 
135.5% of the EU average on the 2022 edition of 

(99)  World Competitiveness Rankings - IMD 

(101) Single Market Scoreboard 2022 

(100) Data and surveys - SAFE (europa.eu) 

(102) See Annex 11 on Innovation for more detail 

52 

1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionFinland6080100120140160020406081012141618202002=100Market services (G_N)Manufacturing (C)Construction (F)Tradable (A_E, G_J)Non tradable (F, K_U) 
 
   
                                                 
   
                                                 
 
 
to 

is  also 

European 

increasing 

Innovation 

Scoreboard (103). 
the 
(by  19.5% 
Performance 
percentage  points)  at  a  rate  higher  than  that  of 
the EU (9.9% percentage points). The government 
set  an  objective 
research  & 
development  expenditure  to  4%  of  GDP  by  2030 
from  2.9%  of  GDP  in  2020  (see  Annex  9).  If 
efficient,  this  investment  could  also  improve  the 
productivity  and  competitiveness  of  the  economy. 
At  the  same  time,  there  are  shortages  of  staff 
qualified  to  engage  in  R&D  activities  and  an 
absence of a clear incentivisation model (104).   

increase 

Graph A12.3: Total factor productivity 

Source: European Commission 

Finnish  SMEs  engage  in  international  trade 
below the OECD average. Even though the value 
of  exports  by  SMEs  increased  in  2021,  exporting 
remains  a  challenge.  A  relatively  limited  share  of 
Finnish  SMEs  sell  online  cross-border  (8%  versus 
the 9% average in the EU, according to the 2022 
Digital  Society  and  Economy 
Index),  despite 
Finland  being  among  the  leaders  in  business 
digitalisation. Compared to peers, and to the EU, a 
low  proportion  of  SMEs  are  concentrated  in  high 
knowledge-intensive  industries  (28%  vs  47%  in 
Sweden and 31.7% in Denmark in 2021) (105). 

The  Finnish  economy  has  been  affected  by 
global 
and 
chain 
substantial  increases  in  energy  prices.  In 

disruptions 

supply 

(103) EIF Working Paper 2022/83, The 2021 EIF SME Access to 

Finance Index, October 2022 update 

(104) Wages and Competitiveness Depend on Productivity: How 
Can We Foster Productivity Growth? (valtioneuvosto.fi) 

(105) 2021/2022 Annual Report on European SMEs - June 2022 - 

2022, 42% of industrial firms reported constraints 
related to shortages in materials or equipment (vs. 
32%  for  the  EU) (106).  Finland’s  economy  relies 
slightly  less  on  both  non-EU  and  single  market 
sources  of  value  added  compared  to  the  EU 
average. In the current economic climate, a survey 
by the Confederation of Finnish Industries (EK) (107) 
indicates  that  up  to  41%  of  SMEs  in  Finland  are 
preparing  to  carry  out  layoffs  and  35%  of  SMEs 
estimated  that  demand  would  decrease  in  2023. 
As has been the case in all Member States, energy 
prices increased during 2022, having a significant 
impact  on  industry,  particularly  energy-intensive 
industries  and  SMEs.  The  wholesale  electricity 
price in Finland tripled in the third quarter of 2022 
compared with the price a year ago.  

Finland  ranks  2nd  out  of  the  27  EU  Member 
States  in  the  European  Commission’s  2021 
edition  of  the  Digital  Economy  and  Society 
Index  (DESI)  and  is  a  leader  in  human  capital, 
integration of digital  technology and digital  public 
services. Finland excels in the availability and use 
of e-government services and digital skills, with its 
total 
proportion  of 
graduates almost double the EU average (7.4% vs. 
3.9%).  However,  this  is  still  insufficient  to  meet 
demand  needs,  as  59%  of  companies  trying  to 
recruit  ICT  specialists  report  hard-to-fill  vacancies 
(EU  55%). Indeed, labour shortages risk becoming 
a drag on the development of the ICT sector. The 
most  intense  shortages  are  found  in  several 
knowledge  areas  such  as  computers,  electronics, 
and mathematical knowledge.     

ICT  graduates  amongst 

Finland  excels  in  the  integration  of  digital 
technology, with all indicators significantly above 
the  EU  averages  for  SMEs,  with  at  least  a  basic 
level  of  digital  intensity  for  companies  using  big 
data  solutions,  and  especially  in  the  use  of  cloud 
services and artificial intelligence.  

Finland is one of the Member States with the 
highest  share  of  renewables  in  its  energy 
mix.  The  share  of  renewable  energy  in  Finland’s 
energy  mix  was  43.8% 
an 
overachievement of its 2020 target of 38%. Data 
from  the  Finnish  government  indicates  that  the 
renewables  share  is  even  higher  for  electricity, 
with  53%  of  all  electricity  produced  in  Finland 

in  2020, 

(106) Business and consumer surveys (europa.eu) 

LE Europe (le-europe.eu) 

(107) Current affairs - Elinkeinoelämän keskusliitto (ek.fi) 

53 

9095100105110115050607080910111213141516171819202122*23*24*(2005=100)FIDESEDKEA19 
   
                                                 
                                                 
coming from renewable sources in 2021 (108). 45% 
of  renewable  electricity  was  produced  with  hydro 
power, 23% with wind power and all the rest with 
wood-based  fuels.  34%  of  total  electricity  was 
produced with nuclear power and 14% with fossil 
fuels and peat.  

could 

renewables 

small-scale 

Delays  in  issuing  of  permits  for  significant 
compromise 
investment  projects 
further  progress  increasing  the  share  of 
renewables.  This  can  lead  to  a  situation  where, 
once  a  project  finally  acquires  a  construction 
permit, so much time has passed that the intended 
technology  has  already  become  outdated.  Each 
municipality  creates  their  own  rules  for  dealing 
with 
plants,  with 
consequent  variation  between  municipalities. 
However, Finland has allocated EUR 6 million from 
its Recovery and Resilience Plan to hire temporarily 
human  resources  for  environmental  permits  and 
procedures  and  project  processing  in  2021-2023, 
and to support new energy technologies, including 
offshore  wind, 
large-scale  solar  power  and 
geothermal  energy.  The  Finnish  recovery  and 
resilience  plan  is  also  investing  in  accelerating 
environmental 
the 
development  of  the  production  and  storage  of 
clean hydrogen on a commercial scale.  

permitting 

promote 

to 

system 

fast-track 

In  order  to  accelerate  permit  and  appeal 
processes for renewable energy projects, the 
government  has  introduced  a  law  creating  a 
temporary 
for 
environmental  and  water  permit  procedures 
and  certain  appeal  processes  for  projects. 
The  legislation  entered  into  force  on  1  January 
2023.  The  fast-track  system is  proposed to  apply 
to  permit  processes  that  are  pending  in  the  state 
environmental and water permit authority between 
2023 and 2026, and to appeal processes pending 
in  the  administrative  courts  between  2023  and 
2028. 

(108) Share of fossil-free electricity production rose to 86 per cent 

in 2021 - Statistics Finland 

54 

 
                                                 
Table A12.1: Industry and the Single Market 

(*) Last available year 
Source: (1) AMECO, (2) Eurostat, (3) ECFIN BCS, (4) Eurostat, (5) COMEXT and Commission calculations, (6) Eurostat, (7) Eurostat, 
(8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: (12) Intrum, (13) SAFE Survey, (14) EIF SME Access to 
Finance Index. 

55 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)4.74.13.43.95.13.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)0.80.91.20.60.50.4Real labour productivity per person in industry (% yoy)(2)-5.32.2-0.11.80.31.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)6.6-1-0.45.12.52.9Material shortage (industry), firms facing constraints, % (3)19105304247Labour shortage using survey data (industry), firms facing constraints, % (3)19179162428Vacancy rate (business economy)(4)2.52.522.93.13.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.230.210.20.190.20.18Installed renewables electricity capacity, % of total electricity produced (6)34.235.237.640.6n.a.50.9Single Market integrationEU trade integration, % (7)21.622.220.022.325.845.8RestrictionsEEA Services Trade Restrictiveness Index (8)0.040.040.040.040.040.05Public procurement Single bids, % of total contractors (9)141514141429Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)11.911.57.59.910.229.6Bankruptcies, Index (2015=100)(11)n.a.n.a.n.a.n.a.n.a.86.8Business registrations, Index (2015=100) (11)n.a.n.a.n.a.n.a.n.a.121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)5317121013Payment gap - public sector, difference in days between offered and actual payment (12)531681215Share of SMEs experiencing late payments in past 6 months, % (13)n.a.48.245.243.542.143EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.330.340.440.4n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.540.310.320.37n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
 
   
 
Graph A13.1: Finland. Regulatory impact 
assessment 

ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
is 
Finland’s  public  administration,  which 
essential for providing  services and carrying 
out  reforms.  The  Finnish  public  administration 
consistently scores as among the most effective in 
the  EU (109).  An  external  review  concluded  that 
decision-making and operational capacity were not 
severely affected by the COVID-19 crisis (110).  The 
implementation  of  the  public  governance  renewal 
strategy (111) has focused on building capacities in 
local  government.  Measures  under  the  recovery 
and  resilience  plan  will  focus  on  the  digital 
transformation  of  employment,  migration,  health 
and social public services. An operating model will 
be  drawn  up  for  the  public  administration  and 
public 
data  more 
to 
systematically.  

companies 

share 

Finland  demonstrates  a  high  maturity  in  e-
government.  The  share  of  citizens  interacting 
with  the  public  administration  via  the  internet  is 
one  of  the  highest  in  the  EU  and  continues  to 
increase.  The  government  aims  to  make  services 
more  accessible  through  other  channels,  e.g.  
telephone and service points. E-government, open 
data  and  portal  maturity  is  well  above  the  EU 
average (Table A13.1).  

Source: Indicators of Regulatory Policy and Governance 
Surveys 2017 and 2021, http://oe.cd/ireg 

Graph A13.2: Finland. Ex post evaluation of 
legislation 

planning, 

coordination 

Policymaking in Finland benefits from strong 
strategic 
and 
innovation.  Regulatory  good  practices,  however, 
are  not  applied  systematically,  due  to  which  the 
country  scores  below  the  EU  average  on  impact 
assessment (Graph A13.1) and  ex post evaluation 
(Graph  A13.2).  Reforms 
regard  are 
underway.  Stakeholder  consultations  are  well 
established  via  several  online  platforms,  which 
also 
provided 
feedback 
contributions (112). 

provide 

this 

on 

in 

Source: Indicators of Regulatory Policy and Governance 
Surveys 2017 and 2021, http://oe.cd/ireg 

(109) Worldwide Governance Indicators, 2021. 

(110) Jari Stenvall et al. (2021), ‘Management of the Covid-19 

pandemic in Finland. Evaluation of the management of the 
Covid-19 pandemic from autumn 2020 to autumn 2021.’ 
Publications of the Government’s analysis, assessment and 
research activities 2022:34 
(https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/16
3995/VNTEAS_2022_34.pdf). 

(111) Strategy for Public Governance Renewal, Ministry of Finance, 

2020 
(https://julkaisut.valtioneuvosto.fi/handle/10024/162573). 

(112) OECD, Better Regulation Practices across the European 

Union, 2022 

56 

0.000.501.001.502.002.503.0000.511.522.53FI2017FI2021FI2017FI2021Primary lawsSecondary lawsa) Regulatory impact assessmentMethodologyOversightSystematic adoptionTransparencyEU-270.000.501.001.502.002.503.0000.511.522.53FI2017FI2021FI2017FI2021Primary lawsSecondary lawsc) Ex-postevaluation of legislationMethodologyOversightSystematic adoptionTransparencyEU-27 
 
                                                 
   
 
   
 
 
 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. (4) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions. 
Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10). 

The  justice  system  performs  efficiently.  The 
justice system performs at an average level when 
it concerns the estimated time to resolve litigious 
civil  and  commercial  cases  (305  days  in  the  first 
instance  in  2021).  The  estimated  time  slightly 
increased  in  administrative  cases  to  296  days  in 
the  first  instance  in  2021  (compared  to  274  in 
2020). The clearance rate for civil and commercial 
cases  at  first  instance  increased  from  93,6  %  in 
2020  to  100,3  %  in  2021.  The  quality  of  the 
justice  system  is  overall  good  and  the  level  of 
digitalisation 
rules 
enabling  digital  tools  are  largely  in  place  and 
digital  tools  are  broadly  used  in  courts,  including 
an 
system, 
technology for distance communication as well as 
for  secure  remote  work  by  judges  and  staff. 
Certain  challenges  still  exist  as  regards  initiating 
and  following  proceedings 
in  civil/commercial 
cases online. As regards judicial  independence, no 
systemic deficiencies have been reported. (113) 

is  advanced.  Procedural 

case  management 

electronic 

(113) For a more detailed analysis of the performance of the 
justice system in Finland, see the 2023 EU Justice 

Scoreboard (forthcoming) and the country chapter for Finland 
in the 2023 Rule of Law Report (forthcoming). 

57 

FI201720182019202020212022EU-27(2)188.387.291.490.892.2n/a64.82n/an/an/a84.784.586.072.93n/a0.60.80.90.90.80.8471.672.472.375.071.1 (b)68.852.0543.443.841.740.244.8 (b)33.616.960.21.42.411.012.64.611.071.41.41.41.51.6 (b)1.71.580.80.80.80.80.8n/a0.791.11.11.21.31.3n/a1.5101.43n/an/an/a1.50n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance 
                                                 
                                                                              
 
   
 
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU.  This  Annex  provides  an  overview  of  Finland’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

Table A14.1: Social Scoreboard for Finland 

fell below pre-pandemic levels to 6.2% in the first 
half of 2022. It then climbed back to 6.8% in Q4-
2022,  above  the  EU  average  of  6.1%,  due  to  the 
deteriorating  economic  environment.  Finland  had 
one of the lowest gender employment gaps in the 
EU  in  2022  (1.2  pps  vs.  10.6  pps  EU  average); 
however,  the  gender  pay  gap  remains  above  the 
EU average (16.5% vs 12.7% in 2021). The reform 
of the family leave legislation, which entered into 
force  in  August  2022,  is  expected  to  improve  the 
career  development  of  women  with  children  and 
reduce the pay gap. 

in 

evident 

administrative 

Finland  is  suffering  from  labour  shortages 
aggravated  by  skills  mismatches  across 
sectors.  While  unemployment  has  remained 
slightly  elevated  in  recent  years,  the  number  of 
open vacancies has increased rapidly. In Q4-2022, 
the job vacancy rate stood at 2.9%, with shortages 
most 
support, 
professional, scientific and technical activities, ICT, 
health  and  social  services  activities.  In  the  same 
quarter,  35%  of  employers  in  the  services  sector 
and  27%  of  employers  in  construction  reported 
that  labour  shortages  were  a  factor  limiting 
production.  Almost  25%  of  the  200  occupations 
assessed are categorised as suffering from labour 
shortages, while over half of the entries in the top 
15  list  of  shortage  occupations  are  in  the  health 
and  social  services  sector.  The  availability  of 
labour is further reduced by an ageing population, 
low levels of labour mobility and labour migration. 
Finland  is  addressing  these  challenges  in  its 
recovery  and  resilience  plan  (RRP)  through  large-
scale  investment in upskilling and reskilling in the 
context of the green and digital transitions, as well 
as  by  attracting  skilled  non-native  born  workers 
through  the  talent  boost  programme.  In  parallel, 
the  major  planned  reform  of  the  social  security 
system aims to improve the incentives to take up 
work by looking into the activation features of the 
system.  However,  there  has  been  few  concrete 
measures proposed so far. 

Update of 27 April 2023. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2023. Due to changes in the 
definition of the individuals’ level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: Eurostat 

The  Finnish  labour  market  has  continued  to 
perform strongly despite the risks stemming 
from  Russia’s  war  of  aggression.  The 
employment  rate  recovered  quickly  from  the 
COVID-19  crisis,  reaching  a  record  high  of  78.6% 
in Q4-2022 amid weakening economic conditions. 
This  was  still  3.7  percentage  points  (pps)  above 
the EU average of 74.7%. The unemployment rate 

labour  market  would  benefit  from 
The 
activating  under-represented  groups  and 
attracting  skilled 
foreign  workers.  The 
difference  between  the  employment  rate  of 
foreign-born and native workers stood at 12 pps in 
2022.  This  gap  was  much  more  pronounced  for 
foreign-born  women  (20  pps  in  2022)  than  men 
to  continuing 
(5.4  pps 

in  2022),  pointing 

58 

8.479.189.31.23.5878.46.81.5110.8114.213.257.6522.24.342.14.4Critical situationTo watchWeak but improvingGood but to monitorOn averagePolicy areaHeadline indicatorEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2022)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021)Dynamic labour markets and fair working conditionsEmployment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022)Long term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Social protection and inclusionAt risk of poverty or social exclusion rate                                            (% of total population, 2021)At risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Impact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Disability employment gap(percentage points, 2021)Housing cost overburden(% of total population, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Better than averageBest performers 
 
 
 
   
 
 
in 

improvement  has  been  observed  only  in  the  age 
group  of  30-34  years,  which  increased  from 
44.9% in 2021 to 46.8% in 2022 and is above the 
EU average (see Annex 15). Finland is tackling the 
high  skills’  supply  challenge 
its  RRP  by 
increasing the number of study places by at least 
600  in  higher  education  institutions.  Furthermore, 
the  ongoing  continuous 
is 
expected  to  open  up  more  opportunities  for 
professional 
retraining 
development  throughout  working 
is 
life.  This 
expected to contribute to achieving the target of at 
least  60%  of  all  adults  participating  in  training 
every year by 2030. The ESF+ will support re- and 
upskilling  and  adult  learning  in  Finland  with 
approximately EUR 182 million in 2021-2027. 

continuing 

learning 

reform 

and 

is 

staff.  Finland 

Access  to  healthcare  services  remains  a 
critical  challenge.  While  Finland  performs  well 
on  most  social  indicators,  self-reported  unmet 
medical  needs  remain  high.  After  the  recent 
improvement (5.4% in 2020 to 4.4% in 2021), the 
indicator bounced back to 6.5% in 2022. Waiting-
times for primary and specialised care are long, in 
particular  due  to  the  COVID-19  pandemic,  the 
related  care  backlog,  and  shortages  of  care  and 
medical 
implementing  a 
comprehensive  health  and  social  services  reform 
under  its  RRP,  which  is  expected  to  improve  the 
availability  and  quality  of  basic  public  healthcare 
services (the  related  RRP measures  of  the  reform 
are to be completed by June 2023). In parallel, the 
parliament has approved a proposal on tightening 
the  care  guarantee  to  improve  access  to  non-
urgent  primary  care  by  reducing  the  waiting  time 
from the current 3 months to 7 days. Finland has 
set  a  national  target  of  100 000  fewer  people  at 
risk of poverty or social exclusion by 2030, out of 
which  at  least  one  third  should  be  children.  The 
target  is  supported  by  ESF+  investments  in  child 
poverty  reduction  (approx.  EUR 12  million),  the 
reform of child protection services (approx. EUR 29 
million)  and  active  inclusion  (approx.  EUR 156 
million). 

challenges  in  their  labour  market  integration.  The 
increased  between 
disability  employment  gap 
2020  and  2021  (from  19.9  pps  to  22.1  pps), 
remaining  above  that  of  Nordic  peers,  although 
slightly  below  the  EU  average.  Under  its  RRP, 
Finland is taking steps to promote the employment 
of  non-EU  nationals  and  vulnerable  groups, 
including  persons  with  disabilities.  The  reform  on 
streamlining 
the  work-  and  education-based 
immigration  process  (to  be  completed  by  the  end 
of 2024)  is expected  to improve opportunities for 
international  degree  students  to  find  employment 
and to increase the immigration of skilled workers. 
The  extensions  of  the  work  ability  programme 
(Työkykyohjelma)  and  Individual  Placement  and 
Support  Project 
the 
(IPS)  aim 
participation  of  people  with  partial  work  ability  in 
the labour market (to be completed by the end of 
2024).  At  the  same  time,  public  employment 
services are undergoing a major reform to improve 
the efficiency of service delivery (to be completed 
by  the  end  of  2023).  The  European  Social  Fund 
Plus  (ESF+)  will  help  unemployed  and  inactive 
people  and 
in 
integrating into the labour market, for example, by 
improving 
the  efficiency  of  unemployment 
services  and  cooperation  with  businesses.  These 
measures  are  expected  to  support  progress 
towards  the  national  employment  rate  target  of 
80% by 2030. 

those  who  face  difficulties 

increase 

to 

Table A14.2: Situation of Finland on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months 
(2) Number of persons at risk of poverty or social exclusion 
(AROPE), reference year 2019 
Source: Eurostat, DG EMPL 

Finland  performs  well  in  digital  skills  and 
adult  learning.  Based  on  2022  data,  adult 
participation in learning over the past 4 weeks was 
high at 25.2% (vs 11.9% in the EU). In 2021, 79% 
of the population aged 16-74 had basic or above 
basic digital  skills, one of the highest rates in the 
EU.  In  parallel,  tertiary  educational  attainment 
among those aged 25-34 years stood at 40.7% in 
2022  and  is  below  the  EU  average  (42.0%).  An 

59 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203078.4(2022)51.4(2016)-65(2021)Poverty reduction2 (thousands)-100-15 000Employment (%)8078Adult learning1 (%)6060 
 
   
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Finland’s education and training system in light of 
the  EU-level 
targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

is 

increasing  (90.9% 

The  shortage  of  teachers  in  early  childhood 
education  and  care  (ECEC)  represents  a 
challenge  for  the  expected  increase  in  ECEC 
participation. Following the trend of the last few 
years, ECEC participation of children above 3 years 
in  2019),  but  still 
old 
considerably  below  the  EU  average  (93.0%)  and 
the  EU-level  target  (96%).  Recently  adopted 
to  promote  ECEC 
reforms 
include  the  restoration  of 
participation.  They 
children’s right to ECEC, pilot  schemes of free-of-
charge  ECEC  for  five-year-olds,  an  extended  pilot 
scheme of two-year pre-primary education, and a 
new national  curriculum. In 2020, from the 2 700 
students who applied  for ECEC teacher education, 
just  38%  were  admitted.  Finland  announced  the 
creation  of  400  new  study  places  for  ECEC 
teachers.  

in  ECEC  aim 

for 

Measures have been taken to strengthen the 
inclusiveness  of  ECEC  and 
quality  and 
compulsory education. The 2020-2022 Right to 
Learn  Programme (114)  has  three  goals:  1)  to 
create  equal  conditions 
learning  paths 
(EUR 120 m);  2)  to  provide  better  support  for 
children’s  learning,  develop  special  needs  support 
and  effectively  use  nationwide  measures  to 
promote 
to 
strengthen the quality of teaching (EUR 10 m). The 
programme provides for an equality fund aimed at 
reducing  socio-economic,  regional  and  gender 
gaps in learning. 

(EUR 50 m);  and  3) 

inclusion 

for 

levels 

Average  student  performance 
in 
Finland  are  good,  but  gaps  have  been 
widening,  notably  in  reading.  In  2018,  the 
International  Student 
OECD  Programme 
Assessment (PISA) reported Finland among the top 
performers.  Nevertheless, 
there  has  been  a 
negative trend in average basic skills performance 
since  2006,  the  sharpest  decrease  among  PISA-
participating 
educational 
challenges in education include the growing impact 
of  students’  home  background  on  educational 
achievement  and  increasing  performance  gaps 

countries. 

Current 

the 

growing 

between 

students 

differences 

between 
schools. 
and 
Differences in reading proficiency among students 
were  bigger  in  2018  than  ever  in  the  history  of 
Finland’s  participation  in  the  PISA  assessments. 
Despite 
between 
the  participating 
individual  students,  out  of 
countries  there  was 
least  variation  between 
schools  in  Finland,  and  the  variation  had  not 
increased from the previous PISA survey. Regional 
variation  also  largely  remained  at  the  previous 
level.  Students  of  low  socio-economic  status  are 
5.1 
to 
times)  more 
in  reading,  maths  and  science 
underachieve 
(combined)  in  school  education  than  students  of 
high socio-economic status. The Finnish Education 
Evaluation  Centre  (FINEEC) (115)  reported  that  ‘(…) 
basic education seems not to be able to close the 
gaps  caused  by  students’  home  background’. 
Another  study (116)  also  reports  that  student 
attainment  had  declined  and  differences  between 
students increased. 

(EU  5.6 

times 

likely 

Graph A15.1: Trend in reading performance in PISA 
mean score, 2003-2018 

Source: OECD (2019), PISA 2018 Database 

The  teaching  profession  is  becoming  less 
attractive.  The  number  of  students  applying  to 
become  school  teachers  nearly  halved  between 
2013  and  2019.  In  2020,  a  quarter  of  all 
employed  teachers  (around  139 000)  were  aged 
50 or over. High workload and staff turnover have 
become issues of concern. A new Teacher Training 
Forum was established in 2019 with the objective 

(115) https://karvi.fi/2021/12/09/matematiikan-osaamisen-taso-

on-laskenut-ja-eriytynyt/ 

(114) https://minedu.fi/en/qualityprogramme 

(116) https://karvi.fi/wp-content/uploads/2021/04/KARVI_0821.pdf 

60 

543547536524526520470480490500510520530540550560200320062009201220152018FIEU-27 
 
                                                 
  
                                                 
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Source: (1,3,4,5,7,8,9,10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data is not 
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 

improving 

the  attractiveness  of 

teacher 
of 
education 
the 
professional  competence  of  teacher  trainers  and 
strengthening the research base. 

programmes, 

developing 

Finland  is  widening  its  higher  education 
offer,  notably  for  the  study  fields  most 
demanded.  The  national  recovery  and  resilience 
plan contributes to widening their higher education 
offer  and  increasing  study  places,  especially  in 
areas  with  labour  shortages.  The  expansion  of 
study  places  cannot  keep  up  with  the  increased 
demand,  delaying  entry  to  higher  education  for 
many  students.  There  is  a  long-standing  backlog 
of  applicants.  In  spring  2021,  only  53 400  of 
almost  157 000  applicants  were  accepted.  For 
2021/22,  around  6 000  new  study  places  were 
made  available,  which  brought  to  10 200  the 
amount of new places created in 2020-2022. 

Reskilling and upskilling are key to matching 
in  an 
the  demand 
increasingly  digital  and  green  economy.  The 
2019  Finnish  Higher  Education  Act  aims,  among 
learning 
other  goals,  to 

improve  continuous 

future  skills 

for 

opportunities 
in  universities  and  polytechnics. 
Higher  education  institutions  are  discussing  their 
strategic  profiles  and  the  areas  in  which  they 
could  increase  their  educational  offer,  and  they 
funding 
receive 
support 
programme (117). 
new 
performance-based  funding  model,  in  place  since 
2021,  encourages  higher  education  institutions  to 
develop  their  adult  education  offer 
through 
continuous learning opportunities (118). 

the  PROFI 

from 
In 

addition, 

the 

(117) The Academy of Finland grants competitive funding, called 
PROFI, to Finnish universities to support and speed up the 
strategic profiling of Finnish universities. Evaluations of the 
instrument have shown that PROFI funding has helped to 
strengthen selected components, reduce fragmentation 
within disciplines and promote multidisciplinary and 
interdisciplinary cooperation 

https://www.aka.fi/en/research-funding/ 

programmes-and-other-funding-schemes/university-
profiling/ 

(118) The share of funding based on continuous learning indicators 
is 9% of the total for universities of applied sciences and 
from 5% for the other general universities. 

61 

96%79.8%91.9%90.9%202093.0%2020Reading< 15%11.1% 20.0%13.5%201822.5%2018Mathematics< 15%13.6% 22.3%15.0%201822.9%2018Science< 15%11.5% 21.1%12.9%201822.3%2018< 9 %9.2%11.0%8.4% 9.6%Men10.6%12.5%10.3%11.1%Women7.9%9.4%6.4%8.0%Cities7.2%9.6%6.5%8.6%Rural areas11.2%12.2%11.7%10.0%Native8.7%10.0%7.6%8.3%EU-born:u20.7%:u20.3%Non EU-born16.8%u23.4%16.5%22.1%6Equity indicator (percentage points)::9.9201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :77.4%60.1%45%40.2%36.5%40.7%42.0%Men32.1%31.2%34.9%36.5%Women48.7%41.8%46.9%47.6%Cities47.7%46.2%48.5%52.2%Rural areas29.0%26.9%26.9%30.2%Native41.5%37.7%42.4%43.0%EU-born23.7%32.7%26.1%39.5%Non EU-born31.1%27.0%31.3%35.7%36.0% 38.3%38.7%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetFinlandEU27FinlandEU27 
                                                 
 
   
 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Finland.  

Life  expectancy  in  Finland  is  higher  than  in 
the  EU  as  a  whole.  Its  upward  trend  was 
disrupted  in  2020  due  to  COVID-19,  but  despite 
the additional deaths caused by COVID-19 in 2021 
(almost  doubled  compared  to  2020 (119)),  overall 
life  expectancy  remained  stable.  In  2020,  the 
leading  causes  of  death  were  diseases  of  the 
circulatory  systems 
(“cardiovascular  diseases”) 
followed  by  cancer  and  Alzheimer  disease. 
Treatable mortality in Finland is low, pointing to an 
overall effective health system. 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

Health  expenditure  in  Finland  is  slightly 
lower  than  the  EU  average  and  almost  80% 
of it was publicly funded in 2020. Spending on 
inpatient  care,  pharmaceuticals  and  medical 
devices  is  below  the  EU  average,  while  spending 
on  outpatient  care  is  considerably  above  the  EU 
average. 
In  2020,  total  healthcare  spending 
increased to 9.6% of GDP, up from 9.2% in 2019. 
This is in line with the upward trend in all Member 
States in  2020.  In  Finland,  this increase is mainly 
attributable to higher spending per capita and only 
to a lesser extent to the GDP contraction observed 
in 2020. That said, the share of health spending in 
total  public  spending  remained  stable  at  13.4%. 
Public  expenditure  on  health  is  projected  to 
increase by 0.8 percentage points (pps) of GDP by 
2070 (compared to 0.9 pps for the EU overall). 

In  2020,  spending  on  prevention  in  Finland 
amounted  to  5.6%  of  total  spending  on 

(119) Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023) 

62 

healthcare,  compared  to  3.4%  for  the  EU 
overall. This is comparatively high, with four other 
Member  States  also  reporting  a  level  above  4%. 
Between  2020  and  2019,  spending  on  prevention 
in Finland increased by 46%, compared to a 26% 
increase  for  the  EU  overall.  Across  the  EU,  this 
increase  was  primarily  driven  by  spending  on 
disease  detection,  surveillance, 
control  and 
response programmes as part of the public health 
response to COVID-19. Between 2019 and 2020, a 
remarkable  proportional 
reported 
spending  was  noted  in  Finland  for  early  disease 
second  highest 
detection  programmes; 
proportional increase of all Member States. 

increase 

the 

in 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

AWG reference scenario 
Source: European Commission / EPC (2021) 

of 

health  workers. 

Finland  faces  shortages  and  an  uneven 
The 
distribution 
employment  in  healthcare  dropped  between  the 
first quarter of 2020 and a fourth quarter of 2022 
by 6% (while it increased in the EU on average by 
7%). The average number of doctors is lower than 
the EU average (3.5 vs 3.9 per 1 000 population). 
The  ratio  for  nurses  is  more  positive  (13.6  vs  8.3 
per 1 000) (data from 2018), but the shortage of 
nurses  has particularly  rapidly increased  in  recent 
years  According  to  a  recent  national  Occupational 
Barometer,  there  were  on  average  8  051  open 
vacancies in the first half of 2022 for nurses and 
15  495  for  practical  nurses.  The  implementation 
of  the  care  guarantee  puts  extra  pressure  on  the 
shortages  of  health  workers.  According  to  SOSTE, 
51  %  of  healthcare  personnel  and  48%  of  social 
services personnel will retire by 2035.  The labour 
market in the health sector is strongly segregated 
according  to  gender,  with  more  than  80%  of 
workers  being  female  (above  the  share  noted  for 
the EU overall). The role of nurses has expanded in 
recent years to include: (i) patient consultations for 
acute and chronic health conditions; (ii) prescribing 
care; 
and 

coordination 

primary 

care 

in 

81.581.781.882.182.081.980.980.981.081.380.480.1201620172018201920202021FinlandEU6.66.10.90.802468EUFinland% of GDP20192070increase 
 
       
                                                 
      
 
Table A16.1: Key health indicators 

Note:  The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

is  quite 

(iii) outpatient  consultations;  and  (iv)  advanced 
roles in operating theatres. The remuneration level 
of  general  practitioners  is  less  than  double  the 
average  national  wage,  which 
low 
compared  to  other  EU  countries.  The  situation  is 
even  worse  for  nurses.  Importantly,  in  October 
2022,  a  long-term  agreement  on  substantial 
raises  of  nurses’  wages  was  reached.  The  uneven 
geographic  distribution  of  healthcare  resources 
increases  disparities  in  access  to  care  in  Finland. 
Owing  to  the  concentration  of  hospitals  and 
specialised  care  units  in  urban  areas,  the  density 
of  doctors  is  greater  in  the  capital  region  of 
Helsinki  and  in  other  major  cities  than  in  remote 
and  sparsely  populated  regions,  where  there  are 
relatively  fewer  doctors.  In  general,  Finland  has 
been  working  to  address  its  workforce  shortages 
for  many  years.  Measures  taken 
include:  (i) 
creating  opportunities  for  continuous  education; 
(ii) expanding  enrolment  for  provider  training  in 
medical schools; (iii) strengthening commitment to 
recruit  foreign  workers;  (iv)  introducing  novel 
skill-mix  solutions  to  increase  employment  in 
nursing;  (v)  making  efforts  to  streamline  sector 
the  use  of 
processes;  and 
technology  to  boost  workforce  productivity  and 
overcome  geographic  barriers.  The 
current 
government  also  has  an  extensive  health  and 
social care workforce programme.  

improving 

(vi) 

Through  its  recovery  and  resilience  plan 
(RRP),  Finland  plans  to  invest    EUR  371.8 
million  (20.4%  of  the  RRP’s  total  budget)  to 
clear  the  backlog 
in  social  and  health 
services due to COVID-19 and to foster equal 
strengthen  primary  healthcare, 
access, 
overhaul  service  delivery  models  and 
increase  digitalisation  of  the  health  system. 

63 

Work  is  under  way  to  implement  the  health  and 
social services reform.  

times. 

The proportion of people in Finland reporting 
unmet needs for medical care is higher than 
the  EU  average.  In  2022,  6,5%  of  the  Finnish 
population  reported  unmet  medical  care  needs, 
which  is  higher  than  in  2021  (4.4%).  By  far  the 
main  reason  reported 
is  waiting  times.  The 
proportion  of  people  reporting  unmet  needs  for 
medical  care  in  the  lowest  income  quintile  is 
almost  twice  that  in  the  highest  income  group. 
Occupational healthcare creates a parallel system: 
it  provides  quicker  and  free-of-charge  access  to 
services  for  the  employed  population,  while 
municipal healthcare users encounter co-payments 
In  2020,  out-of-pocket 
and  waiting 
spending  accounted  for  16.4%  of  current  health 
expenditure,  which  is  above  the  EU  average 
(14.4%).  After  many  years  of  development,  a 
major  administrative  reform  improving  access  to 
healthcare  and  addressing  territorial  imbalances 
was approved  by the Parliament in June 2021. In 
2021, 21 well-being services counties were set up. 
These  counties  and  the  City  of  Helsinki  took  over 
the  responsibility  for  organising  health  and  social 
in  service 
services  from  2023.  This  change 
provision 
reduce 
arrangements 
inequalities, improve the quality and availability of 
services,  and  contain  expenditure  growth. 
In 
parallel,  the  government  adopted  (in  January 
2023)  a  law  on  tightening  the  care  guarantee  on 
non-urgent  primary  care  by  reducing  the  waiting 
time  from  the  current  3  months  to  7  days.  The 
reform  would  enter 
into  force  gradually  on 
1 September 2023 (14-day limit) and 1 November 
2024 
limit).  However,  the  successful 
implementation  of  reforms  also  depends  on  the 
availability  of  healthcare  workers  and  thus  on 

(7-day 

seeks 

to 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)75.771.169.171.3NA91.7 (2020)Cancer mortality per 100 000 population216.9212.8214.5211.4NA242.2 (2020)Current expenditure on health, % GDP 9.19.09.29.6NA10.9 (2020)Public share of health expenditure, % of current health expenditure76.477.077.979.1NA81.2 (2020)Spending on prevention, % of current health expenditure 4.04.14.05.6NA3.4 (2020)Acute care beds per 100 000 population280284261242NA387.4 (2019)Doctors per 1 000 population *3.53.5NANANA3.9 (2020)Nurses per 1 000 population *13.313.6NANANA8.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption in CY and CZ) **13.613.212.610.09.414.5 (2021) 
 
   
 
addressing  above-mentioned  challenges  for  the 
long-term availability of sufficient health workers.  

64 

 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

This  Annex  showcases  the  economic  and 
social  regional  dynamics  in  Finland,  providing 
an  update  on  economic,  social  and  territorial 
cohesion 
in  and  among  the  Finnish  regions 
compared  with  the  EU  as  a  whole  and  the  main 
regional economic recovery challenges.  

the  EU-27  average  –  one  percentage  point  more 
than  in  2019  but  much  lower  than  in  the  mid-
2000s  (before  the  2008-2009  recession  and  the 
Nokia crisis). 

Graph A17.2: Labour productivity in Finland 

than 

the  EU  average 

Finland´s  average  GDP  per  capita  growth 
in 
lower 
was 
2011-2020. 
Internal  disparities  between  the 
capital  region  and  the  rest  of  the  country  remain 
but have decreased. Graph A17.1 gives an idea of 
how  regional  disparities  and  convergence  trends 
have changed over time.  

Graph A17.1: GDP per capita (2010) and GDP 
growth (2011-2020) in Finland 

Source: EUROSTAT 

Regional  data  reveal  clear  disparities.  In 
2020,  labour  productivity  ranged  from  118%  of 
the EU-27 average in Helsinki-Uusimaa to around 
100% in Länsi-Suomi, Etelä-Suomi and Pohjois -ja 
Itä-Suomi,  and  just  76%  in  Åland  (which  had  the 
lowest figure but is a special case, given its insular 
nature  and  small  size).  The  productivity  gap 
between  the  capital  region  and  the  rest  of  the 
country  (see  Graph  A17.2)  increased  during  the 
2008-2010  recession  but  then  fell  back  again  to 
pre-crisis levels, mainly due to the capital region's 
productivity decreasing (especially after 2011) and 
the climax of the Nokia crisis. 

Several  factors  (e.g.  human  capital  and 
specialisation  in  high  technology  sectors) 
explain  the  gap  between  the  regions.  At  the 
national level, the share of population aged 30-34 
with  a tertiary  degree  was  3.3  pps  higher  than in 
the EU-27 as a whole in 2021 (44.9% as against 
41.6%).  However,  it  was  on  average  more  than 
8.5 pps  higher  in  the  capital  region  than  in  the 
other  regions  (50.1%  as  against  41.6%).  The 
regional gap has been closing since 2019, but this 
is due more to a decrease in the capital region of 
Helsinki-Uusimaa than to an increase in the rest of 
the  country.  The  share  of  employment  in  high 
technology  sectors  and  R&D  expenditure  by  the 
private  sector  are  both  above  the  EU-27  average 
at  the  national  level,  but  there  are  significant 
differences  between  the  regions  (with  Helsinki-
Uusimaa leading well above the national average). 
All those factors point consistently to the regions' 
limited capacity to follow national growth trends in 
dynamic and advanced sectors.  

65 

(1) Bubble size corresponds to population size in 2020 
Source: Eurostat, DG REGIO elaboration 

All  regions  (except  Pohjois  -ja  Itä-Suomi) 
have declined by comparison with the EU-27 
average. This was particularly evident in Helsinki-
Uusimaa  and  Åland,  where  real  GDP  per  capita 
decreased  by  an  annual  average  of  0.44%  and 
2.58%  respectively  in  2011-2020  (while  the  EU 
average  grew  by  an  annual  average  of  0.61%). 
The  reduction  in  regional  variations  in  GDP  per 
capita  experienced  by  the  country  resulted  from 
the  richest  regions  falling  back  towards  the  level 
of the poorest ones – rather than the poorest ones 
catching  the  richest  ones  up.  In  2021,  Helsinki-
Uusimaa's GDP per capita was 143% of the EU-27 
average  (i.e.  still  34-48%  percentage  points  (pps) 
higher  than  in  the  other  regions).  Pohjois  -ja  Itä-
Suomi had the lowest value at 95% of the EU-27 
average. 

linked 

The  gap  in  GDP  per  capita  between  the 
capital  region  and  the  rest  of  the  country 
labour 
to  disparities 
was 
productivity. In 2020, national labour productivity 
measured  by  gross  value  added  per  worker  (in 
Purchasing  Power  Standard  (PPS))  was  106%  of 

in 

-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.08090100110120130140150160170180Annual real GDP per head growth2011-2020 (average % change on the preceding year)GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regionsNational averageEU2745505560657075808590000102030405060708091011121314151617181920thousands of EUR per  personCapital regionOther NUTS2 regionsEU27National average 
 
  
  
 
Table A17.1:Selected indicators at regional level – Finland 

Source: Eurostat, EDGAR Database 

leader+ 

(regional 

innovation 

Finland's  regions  all  perform  relatively  well 
in  innovation.  The  capital  region  is  classified  as 
an 
innovation 
scoreboard  2021).  The  regional  competitiveness 
index 2022 ranks all Finnish regions above the EU 
average.  Helsinki-Uusimaa  stands  out  from  the 
rest.  Pohjois-  ja  Itä-Suomi  and  Åland,  which  have 
weaker 
business 
sophistication,  remain  much  closer  to  the  EU 
average. 

infrastructure 

less 

and 

than 

The greater Helsinki region benefited from a 
higher employment rate and lower at risk of 
poverty rates than the non-capital regions in 
2021.  Finland´s  employment  rate  of  76.8%  was 
higher 
(73.1%).  The 
the  EU  average 
employment  rates  in  the  more  developed  regions 
were  the  highest  (89.1%  in  Åland  and  70.2%  in 
the capital region). Finland's at risk of poverty rate 
(AROPE,  14.2%)  was  better  in  2021  than  the  EU 
average  (21.7%),  but  there  were  some  regional 
differences:  the  Pohjois-  and  Itä-Suomi  region 
(16.4%)  was  4.4 pps  higher  than  the  Helsinki-
Uusimaa  region  (12.0%)  and  2.8 pps  higher  than 
the Etelä-Suomi region (13.6%).  

The  capital  region's  demographic  dynamics 
are  very  different  from  those  in  the  rest  of 
the country. Average annual population growth at 
the  national  level  in  2011-2020  (2.9  persons  per 
thousand  residents)  was  well  above  the  EU-27 
average (1.7). Population growth was nevertheless 
concentrated  in  Helsinki-Uusimaa  (+10.5  persons 
per  thousand  residents  on  average)  while  Länsi-
Suomi grew at a rate of just 1.4, and Etelä-Suomi 
and 
experienced 
depopulation  (-0.8  and  -1.8  respectively).  The 
small, 
region  of  Åland  experienced 
significant  growth.  Net  migration  followed  a 
In  the  short  term, 
similar  territorial  pattern. 

Itä-Suomi 

Pohjois- 

insular 

ja 

depopulation can affect the capacity of regions to 
to  exploit  growth  opportunities  and  cope  with 
broader socio-economic challenges in the medium 
to long term. 

Map A17.1:  Regional competitiveness index 2022 

The  country  has  shown  strong  resilience  to 
the  COVID-19  pandemic.  Finland  experienced  a 
slight increase in GDP per capita (in PPS) of 0.2% 
in 2020. Finland rebounded strongly in 2021, with 
GDP per capita growing more than 6%. Despite the 
positive  national  performance,  some 
regions 
encountered recessions in 2020. This was the case 
in  Helsinki-Uusimaa  (-1.1%)  and  Åland  (-11.1%). 
Finland´s  GDP  per  capita  against  the  EU  average 
decreased  from  113%  in  2020  to  112%  in  2021 
due  to  slightly  stronger  rebound  of  the  EU 
economy  elsewhere.  However, 112% is  still  1 pps 
higher  than  in  2019,  which  indicates  that  Finland 
performed  relatively  well  by  EU  standards  during 
the pandemic. 

66 

NUTS 2 RegionGDP per head (PPS)Productivity (GVA (PPS) per person employed)Real productivity growthGDP growthGDP per head growthPopulation growthEmployment ratePopulation with high educational attainmentCO2 emissions from fossil fuels  per headInnovation performanceEU27=100, 2021EU27=100, 2020Avg % change on preceding year, 2011-2020Avg % change on preceding year, 2011-2020Avg % change on preceding year, 2011-2020Total % change, 2011-2020% of pop. aged 20-64, 2021% of population aged 30-34, 2021tCO2 equivalent, 2021RIS regional performance group 2021European Union1001000,220,740,611,773,141,6Suomi / Finland112106-0,040,440,132,976,844,9Länsi-Suomi100990,150,06-0,101,476,542,59,6Innovation leader -Helsinki-Uusimaa143118-0,570,63-0,4410,579,250,19,4Innovation leader +Etelä-Suomi991010,510,440,50-0,876,341,014,6Strong innovator +Pohjois- ja Itä-Suomi95980,390,560,73-1,873,841,313,0Strong innovator+Åland10976-2,20-1,85-2,587,389,11,7Strong innovator  
 
 
 
 
 
  
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

Finland’s  banking  system  remains  highly 
concentrated.  The  ratio  of  total  banking-sector 
assets to GDP is close to 300%, while the top five 
lenders  hold  over  80%  of  total  banking-sector 
assets. Domestic banks have operations in Finland 
and  abroad,  with  the  bulk  of  their  international 
presence  being  limited  to  the  Nordic  and  Baltic 
region,  and  no  direct  exposure  to  Russia,  Ukraine 
or  Belarus.  Domestic 
lenders  are  adequately 
capitalised  and  provide  a  solid  foundation  for 
financing the Finnish economy. 

the 

impact  on 

ratio  of  1%,  which 

Strong  resilience  is  underpinned  by  robust 
financial-soundness metrics. The pandemic and 
the  recent  geopolitical  turmoil  have  had  no 
negative 
financial-soundness 
indicators of Finnish lenders. This shows how local 
banks are generally cautiously managed and were 
from the onset little exposed to the conflict areas 
in eastern Europe. Asset quality benefits from the 
strong  payment  culture  in  Finland,  resulting  in  a 
non-performing-loan 
is 
currently  among  the  lowest  in  Europe.  Solvency 
(measured  through  the  capital  adequacy  ratio)  of 
20.7%  is well above regulatory thresholds, as are 
liquidity  metrics.  Rising  interest  rates  have  lifted 
profitability over the past year, as retail mortgages 
in  Finland  are  mostly  variable  interest,  and  are 
repriced  rapidly  when  interest  rates  rise.  Despite 
the  mostly  positive  performance  of  the  local 
there  are  some  structural 
banking  sector, 
vulnerabilities  –  mainly 
the  above-average 
reliance  on  wholesale  funding  and  the  high 
indebtedness of local households. 

The  funding  model  remains  a  weakness. 
Finnish lenders  are financially  robust.  Banks meet 
all regulatory requirements by a large margin. One 
of the specificities of Nordic banking systems, and 
in particular of the Finnish one, is its relatively high 
reliance  on  wholesale  funding.  Indeed,  deposits 
provide  roughly  half  of  banks’  balance-sheet 
funding,  whereas  the  other  half  is  funded  mostly 
through  market  funding  (also  referred  to  as 
wholesale  funding (120).  By  nature,  and  depending 
on  its  duration,  market  funding  (be  it  in  the  form 
of  bonds,  covered  bonds,  or  other  securities)  is 
more volatile than deposits and exposes banks to 

(120) The mix between deposits and wholesale funding tends to 
vary between banks according to various criteria. However, 
deposits from the non-financial private sector are considered 
the most stable and single largest component of funding for 
euro area banks. 

67 

in 

disruptions 
international  financial  markets. 
However,  by  spring  2022,  the  required  returns  on 
this  type  of  funding  had  not  materially  increased 
over the past year and financial markets continued 
to  operate  without  disruption.  The  local  funding 
model  also  persisted  through  the  pandemic  and 
previously  the  global  financial  crisis. 
It  has 
therefore  proved  its  durability  even  during  major 
crises.  Nevertheless,  past  experience  cannot  be 
taken  as  a  guarantee  that  this  paradigm  will  not 
fail in the future. Therefore, to limit their exposure 
to  market  disturbance,  banks  have  an  interest  in 
further limiting at least their reliance on the short-
term  part  of  their  wholesale  funding  (currently 
below 10% of total liabilities). 

Graph A18.1: Credit growth 

Source: ECB. 

Credit  growth  has  been  uneven  as 
uncertainty  settles  in.  The  Finnish  economy 
recovered smoothly from the COVID-19 pandemic 
Growth  prospects  were  promising  until  spring 
2022.  With  the  outbreak  of  Russia’s  war  of 
aggression  on  Ukraine,  the  increase  in  inflation, 
and  the  prospect  of  increasingly  higher  interest 
rates, post-pandemic optimism gradually vanished. 
Still, the first half of 2022 was marked by strong 
private consumption, especially in accommodation 
and  food-service  activities.  Corporate  investments 
and  demand  for  short-term  lending  continued  to 
grow  rapidly  even  in  Q2-2022  and  subsequently. 
However, while credit to companies remained in an 
uptrend in the 12 months to Q2-2022, lending to 
households  was  declining,  reflecting  low  levels  of 
consumer confidence. The drop in household credit 
was  particularly  pronounced  in  new  mortgage 
lending, which fell in Q3-2022 by a third compared 

-10-50510152020092010201120122013201420152016201720182019202020212022Total privateNFCHH% 
 
 
                                                 
  
 
Table A18.1: Financial soundness indicators 

(1) Last data: Q3 2022. 
(2) Data is annualized. 
Source: ECB, Eurostat, S&P Global Capital IQ Pr 
Source:  

with  Q3-2021.  Sluggish  demand  for  mortgages 
was  also  behind  weaker  house-price  dynamics, 
with house-price growth slowing from 4.5% (year-
on-year)  at  the  end  of  2021  to  just  1%  year-on-
year in mid-2022.  

The  Finnish  property  market  is  noticeably 
slowing  down.  Recent  years  have  seen  mixed 
trends in the Finnish real-estate market. Although 
the  pandemic  led  to  falling  prices  for  some 
commercial  property,  retail  real-estate  remained 
reasonably  active,  including  during  the  pandemic 
period  beginning 
in  2020.  2021  was  an 
exceptional  year  for  the  Finnish  property  market, 
with  sustained  transaction  volumes  and  rising 
prices.  This  buoyancy  and  vitality  continued  into 
the  early  months  of  2022.  However,  the  pace  of 
price  growth  slowed  down  over  the  course  of  the 
year.  The  first  half  of  2022  was  still  marked  by 
robust  data  on  all  metrics.  In  the  second  half  of 
the  year  however,  the  market  mood  was  clearly 
weighed  down  by  the  rising  interest  rates,  lower 
consumer  confidence,  and  increasingly  depressed 
investor  sentiment.  As  financing  costs  rose, 
investors  –  both  households  and  companies  - 
adjusted  to  the  new  economic  environment  and 
became  more  selective.  This  resulted  in  a  fall  in 
the number of transactions in Q3-2022 by about a 
third  compared  to  Q3-2021  and  subdued  price 
increases  (or  even  price  declines  in  real  terms), 
especially in the major cities.  

of 

the 

issue 

solve 

A  temporary  drop  in  mortgage  lending  will 
not 
household 
indebtedness.  Finnish  households  are  heavily 
indebted (121),  with  about  three  quarters  of  their 
debt  being  mortgage  debt.  The  past  decade, 
marked  by  very  low  interest  rates,  gave  an 
additional  incentive  to  households  to  borrow  and 
purchase  a  new  dwelling.  Although  the  risks  of 
household  debt  are  mitigated  by  the  overall 
resilience of household balance sheets, these risks 
should not be underestimated in a rising-interest-
rate  environment.  The  Finnish  authorities  have 
these 
already 
vulnerabilities, 
and 
macroprudential  measures.  Nevertheless,  binding 
legislation  setting  stricter  debt-service-to-income 
or overall debt-to-income caps would undoubtedly 
help  to  curb  the  trend  of  increasing  household 
indebtedness. 

address 
legislation 

steps 
through 

taken 

to 

(121) This risk was again emphasised by the European Systemic 
Risk Board in their report on vulnerabilities in the residential 
real estate sectors of the EEA countries (January 2022). 

68 

201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)199.7269.2271.9293.5284.9286.4276.8207.9Share (total assets) of the five largest banks (%)73.581.680.480.180.0--68.7Share (total assets) of domestic credit institutions (%)146.089.288.086.587.286.4-60.2NFC credit growth (year-on-year % change)4.28.47.24.53.95.6-9.1HH credit growth (year-on-year % change)2.72.22.93.34.00.7-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)1.21.51.41.51.21.01.81.8- capital adequacy ratio (%)23.420.921.321.221.420.318.619.8- return on equity (%)28.88.14.95.89.28.96.16.6Cost-to-income ratio (%)155.755.460.755.650.651.860.651.8Loan-to-deposit ratio (%)194.8133.2136.7127.7121.4115.588.678.0Central bank liquidity as % of liabilities2.51.80.93.96.04.6-2.9Private sector debt (% of GDP)147.7143.9146.1152.7150.1--120.7Long-term interest rate spread versus Bund (basis points)23.126.631.929.027.854.7-93.3Market funding ratio (%)64.463.862.762.361.7-50.840.0Green bonds issued to all bonds (%)1.01.01.93.13.95.23.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
 
                                                 
 
   
 
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview  of  Finland’s  tax  system.  It  includes 
information on the tax structure (the types of tax 
that Finland derives most of its revenue from), the 
tax  burden  on  workers,  and  the  progressivity  and 
redistributive  effect  of  the  tax  system.  It  also 
provides 
tax  collection  and 
compliance. 

information  on 

Finland’s tax revenues as a share of GDP are 
relatively high, with the highest contribution 
coming  from  the  taxation  of  labour  and 
consumption. Table A19.1 indicates that Finland’s 
tax revenues as a percentage of GDP were above 
the  EU  aggregate  in  2021.  The  share  of  labour 
taxes  as  a  percentage  of  GDP  has  increased  to 
21.1% by 0.5 percentage points (pps) compared to 
2020  and  is  similar  to  the  share  for  the  EU  as  a 
whole.  Revenues  of  consumption 
taxes  are 
significantly above the EU aggregate, but revenues 
derived  from  the  taxation  of  capital  were  slightly 
below  the  EU  aggregate  and  revenues  from 
property  taxes  are  significantly  below  the  EU 
aggregate.  Revenues  from  recurrent  property 
least 
taxes,  which  are  among 
detrimental  to  growth,  are  even  lower.  In  Finland, 
about  half  of  property  tax  revenues  are  derived 
from  recurrent  property  taxation,  a  slightly  lower 
share than in the EU overall (see Graph A19.1). In 
the light of the medium term and long-term fiscal 
sustainability challenges, there is scope for Finland 

taxes 

the 

to  make  greater  use  of  currently  underused  tax 
types, such as recurrent property taxes. In addition, 
tax  expenditures  are  relatively  high  in  Finland 
(12.6%  of  GDP  in  2020  according  to  the  Global 
Tax  Expenditures Database).  Evaluating these and 
possibly  discontinuing  some  of  them  might  also 
improve the fiscal position. 

Finland’s  Recovery  and  Resilience  Plan  (RRP) 
includes  several  tax  reforms  to  support  the 
green  transition.  In  particular,  a  reform  of 
energy  taxation  supports  the  electrification  of 
industrial  processes;  and  a  reform  of  transport 
taxation  incentivises  the  use  of  electric  vehicles, 
public transport and bicycles for employees.  

labour 

tax  burden 

is  more 
Finland’s 
progressive than the EU average. Graph A19.2 
shows  that  the  labour  tax  wedge  for  Finland  in 
2022  was  close  to  the  EU  average  for  single 
people at 50% of the income level of the average 
wage  and  above  the  EU  average  for  higher  wage 
levels. This implies that labour taxation in Finland 
is  more  progressive  than  in  the  EU  as  a  whole. 
Second  earners  at  a  wage  level  of  67%  of  the 
average  wage,  whose  spouses  earn  the  average 
wage,  were  subject  to  a  tax  wedge  below  the  EU 
average.  The  tax  and  benefit  system  contributes 
significantly  to  the  low  level  of  income  inequality 
in Finland. It reduced the Gini-coefficient (measure 
for income inequality) in 2021 by 12.2 pps, which 

Table A19.1: Tax indicators 

(1) Forward-looking effective tax rate (OECD).  
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average  
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the Data on 
Taxation webpage, https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2778/109823.  
Source: European Commission, OECD 

69 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)40.642.341.843.037.939.940.040.6Labour taxes (as % of GDP)21.121.020.621.120.020.721.320.9Consumption taxes (as % of GDP)12.914.013.913.810.811.110.711.2Capital taxes (as % of GDP)6.57.27.38.27.18.18.08.5Total property taxes (as % of GDP)1.11.61.61.61.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.60.80.80.81.11.21.21.1Environmental taxes as % of GDP2.72.82.72.52.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)33.531.831.032.532.533.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)42.342.241.843.143.141.040.139.939.739.7Corporate income tax - effective average tax rates (1) (*)20.019.819.819.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)11.711.511.512.28.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)5.06.231.640.7VAT Gap (% of VAT total tax liability, VTTL)3.61.311.09.1FinlandEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
      
 
Graph A19.1: Tax revenues for different tax types as % of total taxation 

Source: European Commission 

is well above the EU average of 7.8 pps (see Table 
A19.1). However, challenges remain as regards the 
complexity  of  the  social  benefit  system,  which  is 
largely  responsible  for  inherent  disincentives  to 
work.  

Graph A19.2: Tax wedge for single and second 
earners as a % of total labour costs, 2022 

Administrative Cooperation.  

Second earner tax wedge assumes first earner at 100% of 
the average wage and no children. 
Source: European Commission 

Finland  performs  relatively  well  in  terms  of 
tax  compliance  and  tax  administration. 
Finland’s digitalisation of tax administration is well 
underway  with  more  than  95%  of  all  tax  fillings 
for  PIT,  CIT  and  VAT  made  electronically  in  2020. 
The  VAT  gap  (the  gap  between  revenues  actually 
collected and  the theoretical  tax liability) is below 
4%, compared with the EU-wide gap of 9.1%. The 
Finnish  RRP 
further 
includes  measures 
strengthen  the  digitalisation  of  administrative 
processes.  Finland  has  also  applied  for  support 
under  the  technical  support  instrument  with  a 
flagship  initiative  for  enhancing  the  quality  and 
use  of 
information  exchanged  between 
Member  States  in  the  context  of  the  Directive  on 

tax 

to 

70 

32.536.843.149.436.8202530354045505550100150Tax wedge, % of total labour costsEarnings in % of the average wageSingle earner - FISingle earner - EU averageSecond earner -  FISecond earner -  EU average51.4327.5421.0149.0431.9718.99Tax revenue shares in 2021, Finland (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital4.224.321.551.000.040.191.812.642.002.7501234567Finland -environmentaltaxationEU -environmentaltaxationFinland - propertytaxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Finland and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
 
      
 
 
      
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

71 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)4.0-0.71.1-2.43.02.10.21.4Potential growth (y-o-y)2.50.50.80.91.01.61.11.2Private consumption (y-o-y)3.61.01.0-3.83.62.10.11.2Public consumption (y-o-y)1.50.71.01.23.92.91.30.2Gross fixed capital formation (y-o-y)4.8-1.31.3-1.00.95.0-0.10.4Exports of goods and services (y-o-y)8.6-1.62.8-7.86.01.71.63.6Imports of goods and services (y-o-y) 8.30.52.7-6.26.07.5-1.32.2Contribution to GDP growth:Domestic demand (y-o-y)3.20.41.1-1.93.03.00.30.8Inventories (y-o-y)0.3-0.20.00.20.01.9-1.50.0Net exports (y-o-y)0.6-0.80.0-0.70.0-2.31.30.6Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.5-0.10.20.10.20.70.20.2Capital accumulation (y-o-y)0.70.50.40.50.50.60.60.5Total factor productivity (y-o-y)1.30.10.10.30.30.30.40.4Output gap1.3-1.1-1.2-2.9-0.9-0.5-1.4-1.1Unemployment rate8.17.98.37.77.76.87.16.8GDP deflator (y-o-y)1.32.11.51.62.24.24.42.4Harmonised index of consumer prices (HICP, y-o-y)0.92.71.00.42.17.24.82.1HICP excluding energy and unprocessed food (y-o-y)0.62.41.00.81.44.44.92.4Nominal compensation per employee (y-o-y)3.32.90.90.43.63.24.53.8Labour productivity (real, hours worked, y-o-y)2.7-0.50.70.10.61.40.51.0Unit labour costs (ULC, whole economy, y-o-y)0.93.90.40.93.33.64.12.7Real unit labour costs (y-o-y)-0.41.7-1.0-0.71.1-0.6-0.20.3Real effective exchange rate (ULC, y-o-y)-0.51.6-0.7-3.22.70.2-1.1-0.8Real effective exchange rate (HICP, y-o-y)-0.4-0.20.40.8-0.6-2.4..Net savings rate of households (net saving as percentage of net disposable income)0.31.5-0.34.72.5-1.7..Private credit flow, consolidated (% of GDP)10.17.54.66.16.1...Private sector debt, consolidated (% of GDP)114.9141.9147.7152.7150.6...of which household debt, consolidated (% of GDP)45.857.563.869.068.0...of which non-financial corporate debt, consolidated (% of GDP)69.184.583.883.682.6...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)0.60.91.21.31.1...Corporations, net lending (+) or net borrowing (-) (% of GDP)4.13.63.46.24.51.24.24.7Corporations, gross operating surplus (% of GDP)27.724.423.725.224.825.325.826.2Households, net lending (+) or net borrowing (-) (% of GDP)-3.2-2.2-2.90.0-1.2-4.2-3.5-3.4Deflated house price index (y-o-y)6.00.2-0.41.42.8-4.1..Residential investment (% of GDP)6.46.26.67.07.07.4..Current account balance (% of GDP), balance of payments4.20.5-1.30.60.5-3.9-1.9-1.2Trade balance (% of GDP), balance of payments4.80.9-0.70.10.1-2.7..Terms of trade of goods and services (y-o-y)-2.2-1.10.61.60.0-0.61.20.1Capital account balance (% of GDP)0.10.10.10.10.10.1..Net international investment position (% of GDP)-24.27.51.4-4.01.0-2.7..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)19.54.14.5.....IIP liabilities excluding non-defaultable instruments (% of GDP) (2)178.4225.6228.0.....Export performance vs. advanced countries (% change over 5 years)2.8-11.4-14.411.89.7...Export market share, goods and services (y-o-y)-1.1-7.5-0.20.6-3.1-2.1-1.0-0.2Net FDI flows (% of GDP)-1.41.8-1.12.7-1.52.1..General government balance (% of GDP)3.5-0.8-1.7-5.6-2.8-0.9-2.6-2.6Structural budget balance (% of GDP)..-1.0-3.9-2.3-0.6-1.8-1.9General government gross debt (% of GDP)38.644.662.074.772.673.073.976.2forecast 
 
 
 
     
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks for Finland over the short, medium and 
long term. It follows the same multi-dimensional 
approach  as  the  European  Commission’s  2022 
Debt Sustainability Monitor, updated based on the 
Commission 2023 spring forecast. 

1  -  Short-term  risks  to  fiscal  sustainability 
low  overall.  The  Commission’s  early-
are 
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table A21.2) (122).  Gross 
financing needs are expected to remain moderate, 
at 16.6% of GDP in the short term (i.e. over 2023-
2024),  and  declining  compared  with  the  recent 
peak  in  2020  (Table 1  in  this  annex).  Financial 
markets’ perceptions of sovereign risk are positive, 
as confirmed by the ratings of the main agencies. 

2 - Medium-term risks to fiscal sustainability 
are medium overall.  

The  DSA  for  Finland  shows  that,  under  the 
baseline,  the  government  debt  ratio 
is 
projected  to  broadly  stabilise  over  the 
medium term, staying at around 75% of GDP 
from  2025  to  2033  (Table 1) (123) (124).  The 
assumed  structural  primary  balance  (a  deficit  of 
0.7%  of  GDP)  contributes  to  these  developments. 
This  position  appears  plausible  compared  with 
past  fiscal  performance, 
the 
country  has  ample  room  for  corrective  action  if 

indicating 

that 

(122) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(123) The assumptions underlying the Commission’s ‘no-fiscal-
policy-change’ baseline notably comprise: (i) a structural 
primary deficit, before ageing costs, of 0.7% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10 (as 
for all Member States); (iv) real GDP growth rates from the 
Commission 2023 spring forecast until 2024, followed by 
EPC/OGWG ‘T+10 methodology’ projections between T+3 and 
T+10, i.e. for 2025-2033 (on average 1.2%); (v) ageing costs 
in line with the 2021 Ageing Report (European Commission, 
Institutional Paper 148, May 2021). For information on the 
methodology, see the 2022 Debt Sustainability Monitor 
(European Commission, Institutional Paper 199, April 2023). 

needed. At the same time, the baseline projection 
benefits  until  2033  from  a  still  favourable 
(although  declining)  snowball  effect,  notably 
thanks  to  the impact  of  Next Generation  EU,  with 
real GDP growth at around 1.2% over 2025-2033. 
Government gross financing needs are expected to 
remain  moderate  over  the  projection  period, 
reaching  around  15%  of  GDP  in  2033,  below  the 
level forecast for 2024. 

The  baseline  projections  are  stress-tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph 1).  For  Finland,  reverting  to  a  historical 
fiscal  position  under  the 
‘historical  structural 
primary  balance  (SPB)’  scenario  would  lead  to  a 
reduction in government debt. If the SPB gradually 
converged its historical 15-year average (a surplus 
of  0.4%  of  GDP),  the  projected  debt-to-GDP  ratio 
would  decline  rather  than  stabilise,  getting  about 
6 pps.  lower  than  in  the  baseline  by  2033.  A 
the  macro-financial 
permanent  worsening  of 
conditions,  as 
‘adverse 
reflected  under 
interest-growth  rate  differential’  scenario  (with  a 
differential  1  pp.  higher  than  the  baseline)  would 
result  in  a  higher  debt  ratio,  by  around  6 pps.  of 
GDP by 2033, as compared with the baseline. The 
‘lower  structural  primary  balance’  scenario  (with 
the  SPB  level  permanently  0.3  pp.  lower  than  in 
the baseline) would also lead to a higher debt ratio 
(+2  pps.  of  GDP  by  2033)  compared  with  the 
baseline.  A  temporary  worsening  of  financial 
conditions,  as  reflected  in  the  ‘financial  stress’ 
scenario  (with  a  temporary  increase  of  interest 
rates by 1 pp.), would only marginally increase the 
debt ratio by 2033 compared with the baseline.  

the 

Additionally,  stochastic  debt  projections 
indicate  medium  risk  (Graph 2). (125)  These 
projections point to a 59% probability of the debt 
ratio in 2027 being greater than in 2022, entailing 
medium risk given the initial moderate debt level. 
Moreover, the stochastic projections point to some 
(as  measured  by  the  difference 
uncertainty 
between  the  10th  and  90th  debt  distribution 
percentiles) 
the  baseline  debt 
projection. 

surrounding 

(124) Table 1 shows the baseline debt projection and its 

(125) These projections show the impact on debt of 2000 different 

breakdown into the primary balance, the snowball effect (the 
combined impact of interest payments and nominal GDP 
growth on the debt dynamics) and the stock-flow 
adjustment.  

shocks affecting the government’s primary balance, 
economic growth, interest rates and exchange rates. The 
cone covers 80% of all simulated debt paths, therefore 
excluding tail events 

72 

 
 
                                                 
                                                 
 
 
and,  despite  a  lengthening  of  debt  maturity  in 
recent years, the share of short-term debt remains 
at  around  10%  of  total  debt.  In  addition,  some 
contingent  liability  risks  stem  from  the  private 
sector, including via the possible materialisation of 
sizeable  state  guarantees  granted  to  shipbuilding 
companies.  On  the  other  hand,  risk-mitigating 
factors include the lengthening of debt maturity in 
recent  years,  relatively  stable  financing  sources 
(with a diversified and large investor base) and the 
currency  denomination  of  debt.  In  addition,  the 
structural  reforms  under  the  NGEU/RRF,  if  fully 
implemented, could have a further positive impact 
on GDP growth in the coming years, and therefore 
help to mitigate debt sustainability risks. 

3  -  Long-term  risks  to  fiscal  sustainability 
are medium overall (126).  

The  S2  sustainability  gap 
indicator  (at 
2.9 pps.  of  GDP)  points  to  medium  risk, 
suggesting  that  Finland  would  need  to 
improve  its  structural  primary  balance  to 
ensure debt stabilisation over the long term. 
This result is mainly underpinned by the projected 
increase  in  ageing-related  costs  (contribution  of 
2.0  pps.  of  GDP)  and,  to  a  lesser  extent,  by  the 
unfavourable 
position 
budgetary 
initial 
(Table 2). 
(contribution  of  1.0  pp.  of  GDP) 
Developments in ageing costs are primarily driven 
by  the  projected  increase  in  long-term  care  and 
health  care  expenditure  (joint  contribution  of  2.2 
pps.  of  GDP),  while  the  increase  in  pension 
expenditure is more limited (contributing 0.5 pp. of 
GDP). A number of investments and reforms in the 
RRP  contribute to  supporting  the  efficiency  of the 
Finnish  long-term  care  system,  so  it  will  be 
important 
their 
to 
implementation. 

carefully  monitor 

Given  low  long-term  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term  risks  are  assessed  as  medium.  Indeed, 
the  S1  sustainability  gap  indicator  signals  that  a 
limited  consolidation  effort  of  1.3  pps.  of  GDP 
would be needed to reduce debt to 60% of GDP by 
2070 (Table 2). This result is mainly driven by the 
projected  increase  in  ageing  costs  and  Finland’s 
initial debt level (contributing 0.7 pp. and 0.4 pp. of 
GDP, respectively).  

Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  the 
one  hand,  risk-increasing  factors  are  related  to 
recent  increase  in  interest  rates  and  contingent 
liabilities’ risks linked to the banking sector. Around 
half  of  the  public  debt  is  held  by  non-residents 

(126) The S2 fiscal sustainability indicator measures the 

permanent SPB adjustment in 2024 that would be required 
to stabilise public debt over the long term. It is 
complemented by the S1 indicator, which measures the 
fiscal gap in 2024 to bring the debt-to-GDP ratio to 60% in 
the long term. For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

73 

 
                                                 
Table A21.1: Debt sustainability analysis - Finland 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Finland 

Source: Commission services. 

74 

Table 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)74.772.673.073.976.275.975.575.175.175.275.275.375.575.6Changes in the ratio9.9-2.10.40.92.3-0.3-0.3-0.40.00.10.10.10.10.1of whichPrimary deficit4.92.20.31.71.31.21.11.01.01.11.21.21.21.2Snowball effect1.2-3.2-3.8-2.4-1.5-1.5-1.4-1.4-1.1-1.1-1.1-1.1-1.1-1.1Stock-flow adjustments3.8-1.23.91.52.50.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)19.211.716.316.117.115.014.814.714.714.814.914.915.015.0S1S2Overall index  (pps. of GDP)1.32.9of which Initial budgetary position0.21.0Debt requirement0.4Ageing costs0.72.0of which    Pensions-0.10.5     Health care0.40.6     Long-term care1.11.6Others-0.7-0.8Table 2. Breakdown of the S1 and S2 sustainability gap indicators60657075808520202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p9045556575859520202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallLOWLOWMEDIUMMEDIUMLOWMEDIUMDebt level (2033), % GDP75.669.377.681.476.1Debt peak year20242024203320332024Fiscal consolidation space95%83%97%95%95%Probability of debt ratio exceeding in 2027 its 2022 level59%Difference between 90th and 10th percentiles (pps. GDP)26.6(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWMEDIUMMEDIUMLOWMEDIUM