Draft budget
The draft budget of Minister of Finance Riikka Purra for 2027 will enable growth and implement previously decided fiscal consolidation measures

The draft national budget of the Minister of Finance for 2027 will implement policies agreed in the spring spending limits session. The budget proposal totals EUR 92.2 billion, envisioning a deficit of EUR 12.9 billion.

The projected deficit is EUR 0.5 billion smaller than the current year after including the second supplementary budget for 2026. The estimated deficit for 2026 disregards non-recurrent revenue recognition arising from abolition of the National Housing Fund, which will have no impact on borrowing. The draft budget will be released in full at budjetti.vm.fi on Thursday 6 August.

“The economic outlook is currently quite favourable, notwithstanding the difficult state of public finances. Finland's economy has grown briskly for three consecutive quarters, with growth strengthening in all main sectors. Exports, order books, investment and business confidence are on the rise, fostering a strong and encouraging outlook," explains Minister of Finance Riikka Purra.

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

At its spring spending limits session, the Government decided on austerity measures totalling approximately EUR 540 million by the year 2030. These savings will replace individual previously decided savings from social and healthcare services, and measures that affected revenue. Public sector austerity measures will also finance investment and growth measures that were decided in the spending limits session. The savings decided in the spending limits session will total some EUR 391 million in 2027.

EUR 60 million of the savings decided in the spring will be additional savings on central government operating expenses in 2027. These savings have now been fully allocated in line with draft budgets of the ministries and Government policies. Additional savings of EUR 25 million that were previously decided in autumn 2025 have also been allocated. The total savings in operating expenditure decided during the electoral period will amount to some EUR 592 million in 2027.

The 2027 budget will include several fiscal consolidation measures that were decided in autumn 2025 with a view to reducing the accumulation of public debt. For example, the authority to approve interest-subsidised loans for state-subsidised housing construction will be reduced by EUR 365 million, with environmentally and health-motivated taxation increased by a total of EUR 50 million in taxes on tobacco and alcohol. Transfers from the State Pension Fund to the national budget will also increase by some EUR 100 million. This will balance pension expenditure.

The outlook for public finances has improved slightly, but conditions remain difficult

Finland's economic growth has clearly accelerated over the first half of the year, with improved economic expectations both in the business community and private households.

This growth has yet to be reflected in the employment situation, with rising prices and interest rates eroding the purchasing power of households. Tax cuts, rising wages and household savings are nevertheless providing resources for growth in consumption.

The economic upturn has not yet become significantly visible in public finances. Despite a slight increase in projected public tax revenue in the early part of the year, the outlook for public finances has remained difficult.

A forecast published by the Ministry of Finance in June suggests that gross domestic product (GDP) will grow by 0.8 per cent in 2026 and 1.6 per cent in 2027. The general government deficit is forecast at 4.4 per cent of GDP in 2026 and 4.6 per cent in 2027.

The Ministry of Finance will update its economic forecast in August, with the updated forecast forming the basis of the Government's budget proposal. The autumn economic forecast of the Ministry of Finance will be published on 21 September.

The 2027 draft budget envisages a deficit of just under EUR 13 billion

The total 2027 draft budget is EUR 92.2 billion. This is EUR 0.5 billion higher than the sum budgeted for 2026 (including the second supplementary budget). The cost-saving impact of Government austerity decisions will gather strength in 2027.

Expenses will grow, in particular due to index adjustments and rising interest expenses. The cost of servicing central government debt is estimated at EUR 4.3 billion, which is EUR 1.1 billion higher than the sum budgeted for the current year (including the second supplementary budget). The deficit has decreased by EUR 0.3 billion compared to the spring general government fiscal plan. Estimated tax revenue has grown by EUR 0.5 billion compared to the spring estimates. This increase in estimated tax revenue is explained by higher-than-projected tax revenues collected in 2026, and by an update of the macroeconomic forecast in June 2026. Estimated interest expenditure has grown by EUR 0.2 billion compared to the spring general government fiscal plan.

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

Promotion of transport projects

At the spring spending limits session, the Government agreed on an enlargement of the fixed-term investment programme by some EUR 0.2 billion to approximately EUR 4.7 billion. The Government also agreed additional or new funding for several projects. Some of the projects were included in the second supplementary budget for the current year. The following investment programme transport projects will be added to the 2027 draft budget:

• Widening of Highway 8 between Bäckliden and Brännbacken
• Improvement of Highway 23 between Rantala and Lajunlahti, Heinävesi
• Improvement of Highway 9 junction near Suonenjoki centre
• Improvement of Highway 506 at the junction with Karjalankatu, Juuka
• Kupittaa public transport deck
• Improvement of Highway 13 between Savitaipale and Lemi
• Improvement of Highway 9 at Ylämylly (authorisation)
• Renovation of train and metro stations in Helsinki
• Improvement of Main Road 51 at the Kela intersection
• Deepening of Loviisa sea lane
• Karelian Line development (Luumäki–Joutseno double track extension (from Lappeenranta to Lauritsala) and Poiksilta passing loop between Imatra and Joensuu)
• Northern extension of the Karelian line between Joensuu and Nurmes (measures to improve functionality and carrying capacity, including planning of electrification between Joensuu and Uimaharju), electrification of the Vuokatti–Kontiomäki line

Highlights of Government tax measures

The Government Programme provides that taxation policy will encourage work and self-employment, and support domestic ownership. The Government has boosted incentives for work and productivity by easing taxation of labour and reducing the highest marginal tax rates. The Government has also strengthened public finances in particular by increasing consumption taxes, thereby shifting the focus away from taxation of labour towards consumption taxation.

In 2027, the Government will improve business incentives by reducing the corporate tax rate from 20 per cent to 18 per cent. Reduction of labour taxation will continue through an increase of EUR 230 million in the earned income deduction, coupled with an index adjustment to earned income tax bases at all income levels. The ability of Finnish growth enterprises to attract skilled labour will be improved by shifting the taxation date of employee stock options with respect to shares in unlisted companies from the time of exercise to the time of transfer of the underlying asset, with the entrepreneur deduction also increased. Measures to boost tax revenues will include an increase in alcohol and tobacco taxes.

Additional investment in defence and security

The Russian war of aggression has fundamentally changed the security environment of Finland. NATO membership is also affecting the needs of defence enhancement. An increase of EUR 620 million over the approved budget for the previous year is proposed in appropriations of the Ministry of Defence administrative sector. The Minister of Finance 2027 draft budget also includes EUR 1.3 billion in budget authorities for procurement of defence materiel.

A procurement authority of EUR 186 million is proposed for the operational expenses of the Defence Forces.

An additional allocation of EUR 200 million is proposed for support to Ukraine.

Central government R&D funding to be increased

The Government will maintain its commitment to increasing R&D funding to 1.2 per cent of GDP by the year 2030. In accordance with a previously made decision, the Finance Act will nevertheless be amended so that the increase in central government funding required to achieve this target is updated annually to match the latest forecast.

Under the budget proposal, total R&D funding will be approximately EUR 3.39 billion in 2027. This represents an increase of some EUR 220 million compared to 2026. As part of previously decided fiscal consolidation measures, the central government R&D funding contribution will include funding allocated to Sitra R&D and some EU R&D project funding as of 2027. As previously decided, the largest increases will concern the R&D authority allocated to Business Finland and the research project authority of the Academy of Finland.

Finances of wellbeing services counties

A total of some EUR 27.5 billion is proposed for universal funding for the wellbeing services counties. This is an increase of some EUR 0.34 billion over the approved budget for 2026. The increase is mainly explained by a transition to the 2027 cost level. The index increase in funding will be 2.63 per cent in 2027, increasing funding for wellbeing services counties by some EUR 697 million. Annual growth in the need for healthcare and social welfare services will increase funding by some EUR 248 million. Only 60 per cent of this growth will nevertheless be taken into account as of 2027, reducing funding by some EUR 61 million.

An ex-post review of funding based on the 2025 financial statements of wellbeing services counties will reduce funding by approximately EUR 394 million.

The funding also allows for amended legislation on assigned functions and client charges that will reduce funding by a total of EUR 187 million compared to 2026.

The largest decrease (EUR -87.8 million) will be due to new client charges. The increases allow for such factors as the increase in funding arising from an amendment to the Disability Services Act.

Local government finances

The allocation of EUR 3.5 billion proposed in central government transfers to municipalities for basic public services is approximately EUR 40 million less than in the 2026 Budget. The reduction in transfers is due to such factors as an increased share of municipalities in funding basic social assistance. This will reduce the appropriation by some EUR 121 million compared to 2026. The 2027 revision of cost sharing between central government and municipalities will increase the central government transfer by an estimated EUR 22 million. This estimate will be specified when preparing the budget proposal. The provisional index increase in central government transfers for basic public services in 2027 is 3.5 per cent, meaning an increase of some EUR 117 million in central government transfers.

The increase in the indexation brake decided at the Government's spring spending limits session will reduce the central government transfer for basic municipal services. An increase in the indexation brake from 1 percentage point to 2.8 percentage points will reduce the central government transfer by approximately EUR 93 million compared to the 2026 Budget.

On the other hand, several reforms will increase the central government transfer, such as the introduction of an employment policy subsidy and reimbursement of additional costs arising from the integration assistance based on legislation on the maximum waiting time to access services.

The new and enlarged functions will increase the total central government transfer for basic public services by approximately EUR 44 million. Some EUR 31 million of this is a transfer of funding from other items in the national budget.

Inquiries:
Mika Niemelä, Head of Budget Department, tel. +358 29 553 0525, mika.niemela(at)gov.fi
Jussi Lindgren, Special Adviser to the Minister of Finance (Economic Affairs), tel. +358 29 553 0514, jussi.lindgren(at)gov.fi