Economic forecasts routinely miss the mark, report finds

A report by the Kalevi Sorsa Foundation finds that economic forecasts for Finland are usually significantly inaccurate, yet political decisions continue to rely on them, Yle reports.

“Economic forecasts are correct mainly by chance,” said Lauri Finér, the foundation’s executive director, who prepared the report with Jussi Systä, its economic policy specialist.

The report criticises the close link between forecasts and political decisions. The issue is particularly relevant as the Finnish Government prepares to negotiate next year’s state spending in September. Those decisions will be linked to forecasts by the Ministry of Finance on economic growth and public finances.

Forecasts miss growth by an average of one percentage point

Finér and Systä examined gross domestic product forecasts from seven forecasting organisations. They found that all of them were wrong by roughly the same amount.

Forecasts for economic growth in the current year also regularly fail. A forecast made in the autumn for growth in the following year differs from the eventual outcome by an average of one percentage point, according to the report.

“Forecasting organisations cannot predict economic turning points, or even the economic growth of the coming year,” Finér said.

The Ministry of Finance produces the forecasts with the greatest impact on political decision-making. Its projections affect not only the state budget but also the entire government programme.

According to the report, the Ministry of Finance has generally forecast stronger economic growth than was eventually recorded. Finér said this could lead to unnecessarily large fiscal adjustments.

“If growth is assumed to be higher than it really is, the wrong kind of policy may be pursued. Adjustments may be too large and could thereby harm economic growth,” he said.

In addition to the Ministry of Finance, the foundation examined forecasts from the Bank of Finland, the Research Institute of the Finnish Economy, Pellervo Economic Research, the Labour Institute for Economic Research, Nordea and OP Pohjola for the years 2016 to 2025.

Forecasts for 2023 missed a sharp contraction

For 2023, the organisations forecast GDP growth of between 0.5 and 1.7 per cent. The economy ultimately contracted by 1.3 per cent.

The Bank of Finland forecast growth of 0.5 per cent, OP 0.6 per cent, the Research Institute of the Finnish Economy 1.0 per cent, Pellervo Economic Research 1.0 per cent, Nordea 1.5 per cent, the Labour Institute for Economic Research 1.5 per cent and the Ministry of Finance 1.7 per cent.

Debt brake increases the importance of forecasts

The Ministry of Finance also forecasts the state of public finances, measured through the budget deficit or surplus. The report says that forecasts for the deficit are also frequently inaccurate.

However, forecasts have become more important because of a fiscal policy law passed last year, Finér said. The law includes a debt brake that requires public finances to be adjusted on the basis of forecasts.

Calculations based on the debt brake estimate that public finances must be adjusted by between 8 billion and 11 billion euros by 2031. The Kalevi Sorsa Foundation’s report says the actual amount could be twice as high, or zero, because of the extent to which the underlying forecasts can vary.

“Economic forecasts may not even be able to identify the growth of the current year,” Systä said.

Preliminary statistics also contain errors

The researchers also examined Statistics Finland, because all the forecasting organisations use its preliminary data as the basis for their projections.

Statistics Finland first publishes preliminary information on quarterly or annual GDP growth. Revised and verified figures are released only after a delay of about two years.

The report says the preliminary figures are generally inaccurate. Its analysis found that the first preliminary estimate of GDP growth differs from the eventual figure by an average of 0.7 percentage points.

“When forecasters do not know where the economy is now, it is also impossible to predict the future,” Finér said.

Statistics Finland’s figures were recently questioned in public discussion after the agency revised its data on economic growth in 2025. Preliminary figures indicated that the economy had contracted that year, while the revised data showed that it had grown considerably.