As it has often in recent years, the Ministry of Finance used its latest economic forecast on Tuesday to deliver a bleak assessment of public finances.

A strengthening economy is boosting tax revenues, but rising defence spending is widening the budget deficit. Finland's debt-to-GDP ratio is set to exceed 90 percent this year.

But this time there is a brighter note. According to the ministry, signs of economic growth have already emerged in the first half of the year. It forecasts that Finland's economy will grow by 0.8 percent this year. Growth is expected to accelerate to 1.6 percent in 2027 and 1.7 percent in 2028.

The ministry expects household consumption to grow by just under a percent this year, providing a boost to the economy after several years in which Finnish households have preferred to save rather than spend.

At the same time, households' purchasing power is being eroded by higher energy prices and rising interest rates. Both have been fuelled by the war involving Iran, which has disrupted oil trade and pushed up prices.

Public finances in the red

While the economic outlook has finally begun to improve, public finances are still strained.

Fighter jet purchases are widening the deficit, while higher interest rates are pushing up the cost of servicing state debt.

The ministry stressed that the public finances will not improve in the years ahead without new consolidation measures, as defence spending continues to rise.

At the same time, the ministry forecasts that the unemployment rate will rise to 10.4 percent this year.