Finland Unveils €92.5 Billion Budget for 2027 With €12.4 Billion Deficit

Finland’s government has reached agreement on its 2027 budget proposal, setting total spending at €92.5 billion and forecasting a €12.4 billion deficit.

The agreement, reached by Prime Minister Petteri Orpo’s government on Tuesday, 1 September, is the final budget of the current parliamentary term ahead of Finland’s parliamentary elections next spring.

Orpo said the government completed its final budget negotiations in a single day and argued that Finland’s economy is now showing clearer signs of recovery.

“Economic growth increases confidence in the future,” Orpo said, adding that the government’s policies were aimed at improving competitiveness and creating better conditions for entrepreneurship, investment and growth.

€4.8 billion in spending cuts

The government is continuing its programme of fiscal consolidation. Direct spending cuts included in the 2027 budget will amount to approximately €4.8 billion, while measures specifically aimed at limiting indebtedness will total almost €1 billion next year.

The government says the savings will be focused partly on central government administration and other areas where it believes spending can be reduced.

The package includes around €593 million in operating-expense savings in 2027. Other measures include a €365 million reduction in the authority for interest-subsidised loans for state-supported housing construction, as well as higher excise taxation on tobacco and alcohol.

Tax cuts for workers

At the same time, the government is moving ahead with tax reductions designed to boost household purchasing power and domestic demand.

Taxes on low- and middle-income earners will be reduced by around €230 million in 2027. Earned-income tax thresholds will also be adjusted across all income levels.

The government is also lowering the corporate tax rate from 20 per cent to 18 per cent from the beginning of 2027. Officials say the measure is intended to support entrepreneurship, investment and economic growth.

Other tax measures include changes to the taxation of employee stock options and an expanded tax deduction for entrepreneurs.

Debt interest remains a major burden

Despite the savings programme, Finland will continue to face significant pressure from its growing debt burden.

The government estimates that interest payments on central government debt will reach €4.4 billion in 2027, around €1.2 billion more than the amount budgeted for 2026. Rising interest costs are one of the main reasons the deficit remains high.

The €12.4 billion deficit is nevertheless around €900 million smaller than the figure budgeted for 2026, when the second supplementary budget is taken into account.

More money for defence and research

The 2027 budget also increases spending in several strategic areas.

Defence appropriations are set to increase by €618 million compared with the 2026 budget. The proposal also includes €1.3 billion in authorisations for defence equipment procurement and an additional €200 million for support to Ukraine.

Research and development will also receive additional funding. Total R&D funding is expected to reach approximately €3.4 billion in 2027, an increase of about €230 million from 2026.

The government is also allocating funding for transport and construction projects as part of an investment programme worth around €4.7 billion over the coming years. The 2027 investment programme includes €878 million in appropriations.

Government says economy is turning around

The budget agreement comes as the government says Finland’s economic outlook has improved after a prolonged period of weak growth.

According to the government, output has expanded for three consecutive quarters, while prospects for businesses and households have improved. Investment is expected to be supported by projects linked to the energy transition, artificial intelligence and defence, with exports also expected to increase.

The government expects stronger economic activity to begin supporting employment towards the end of this year.

However, Finland’s public finances remain under considerable pressure, and the government acknowledges that further fiscal adjustments will be needed in the future.

Budget still needs parliamentary approval

The €92.5 billion figure represents the government’s budget proposal, not yet the final budget approved by Parliament.

The proposal is scheduled to be submitted to Parliament on 21 September, after which lawmakers will debate the measures. Parliament is expected to approve the national budget in December.

The 2027 budget will be closely watched politically as it is the final budget of Orpo’s current parliamentary term, with the next Finnish parliamentary election scheduled for spring 2027.