2019 Index of Economic Freedom

Finland

overall score74.9
world rank20
Rule of Law

Property Rights89.6

Government Integrity92.5

Judicial Effectiveness81.2

Government Size

Government Spending7.2

Tax Burden66.8

Fiscal Health86.4

Regulatory Efficiency

Business Freedom89.4

Labor Freedom50.3

Monetary Freedom84.8

Open Markets

Trade Freedom86.0

Investment Freedom85.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 5.5 million
  • GDP (PPP):
    • $244.0 billion
    • 3.0% growth
    • 0.8% 5-year compound annual growth
    • $44,333 per capita
  • Unemployment:
    • 8.6%
  • Inflation (CPI):
    • 0.8%
  • FDI Inflow:
    • $1.3 billion

Finland’s economic freedom score is 74.9, making its economy the 20th freest in the 2019 Index. Its overall score has increased by 0.8 point, with higher scores for fiscal health and government spending outpacing small declines in judicial effectiveness and monetary freedom. Finland is ranked 11th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

The government must maintain fiscal sustainability as public finances come under increasing pressure from a rapidly aging population, reduce high labor costs, boost productivity in traditional industries, and increase demand for exports. The quality of the legal framework is among the world’s highest, providing effective protection of property rights. The rule of law is well maintained, and a strong tradition of minimum tolerance for corruption continues. Absent extraordinarily high levels of government spending, Finland would likely rank among the world’s 10 freest economies.

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Background

Formerly part of Sweden and later the Russian Empire, Finland gained independence in 1917, joined the European Union in 1995, and adopted the euro in 1999. Prime Minister Juha Sipilä of the Center Party formed a coalition in 2017 with the center-right National Coalition Party and the newly formed and conservative Blue Reform party. President Sauli Niinistö of the National Coalition Party won a second term in 2018. The export-led economy is centered on manufacturing, principally in the wood, metals, telecommunications, and electronics industries, and has enjoyed steady growth. Heavily dependent on Russian energy, Finland cut tariffs on Russian electricity imports in June 2018 and has approved construction of the controversial Nord Stream II pipeline inside its exclusive economic zone.

Rule of LawView Methodology

Property Rights 89.6 Create a Graph using this measurement

Government Integrity 92.5 Create a Graph using this measurement

Judicial Effectiveness 81.2 Create a Graph using this measurement

Finland maintains one of the world’s strongest property rights protection regimes and adheres to many international agreements that aim to protect intellectual property. Contractual agreements are strictly honored. The quality of the judiciary is generally high. Corruption is not a significant problem in Finland, which was ranked 3rd out of 180 countries surveyed in Transparency International’s 2017 Corruption Perceptions Index.

Government SizeView Methodology

The top personal income tax rate is 31.25 percent, and the top corporate tax rate is 20 percent. Other taxes include value-added and capital income taxes. The overall tax burden equals 44.1 percent of total domestic income. Over the past three years, government spending has amounted to 55.6 percent of the country’s output (GDP), and budget deficits have averaged 2.0 percent of GDP. Public debt is equivalent to 61.4 percent of GDP.

Regulatory EfficiencyView Methodology

Finland’s efficient business framework facilitates robust innovation and growth in productivity. In 2017, Finland increased the maximum length of the probationary period for permanent employees. The government also recently took some actions aimed at making unemployment less attractive. The EU has increased subsidies to Finland while the government considers reforms in its green-energy subsidy program.

Open MarketsView Methodology

The combined value of exports and imports is equal to 76.7 percent of GDP. Finland implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. The average applied tariff rate is 2.0 percent. Finland welcomes foreign investment. The financial sector, with sound regulations, provides a wide range of services.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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