Analysing Finland’s Economic Resilience in an Uncertain Global Security Landscape
As global security dynamics shift in response to growing geopolitical tensions, Finland finds itself at a crossroads. The country’s economic and defence strategies are under growing scrutiny, especially as the spectre of defence spending soaring to 35% of GDP becomes a real possibility. A new study from consulting firm Capful and the innovation fund Sitra has highlighted four potential futures in which Finland could be forced into a war economy. This analysis explores these scenarios and offers critical insights on how Finland can prepare for an uncertain future.
The Post-Ukraine World: A Wake-Up Call for Finland
The ongoing war in Ukraine has fundamentally altered the security landscape in Europe, compelling Finland to reevaluate its defence posture. With Russia’s actions now directly threatening regional stability, Finland’s role within the EU and NATO is more pivotal than ever. The key question raised by the study is: How would Finland’s economy respond to a dramatic increase in defence spending, potentially reaching 35% of GDP?
The scenarios outlined in the study are a sobering reminder of the difficult choices facing Finland in the coming decades. Here’s a deeper look at the four potential paths.
1. A “New Cold War”
In this scenario, global tensions persist, with the world divided into several blocs. The EU, NATO, and Russia are in a tense standoff, but open military conflict is avoided. Russia’s hybrid warfare tactics—ranging from cyberattacks to disinformation campaigns—continue to undermine European unity. The United States remains an ally, but Europe must take primary responsibility for its own security.
In response to this, Finland’s defence spending rises to 5% of GDP—well above NATO’s baseline of 3.5%. The country is committed to enhancing its military capabilities and bolstering the resilience of its critical infrastructure. Despite the higher defence expenditure, Finland’s economy remains relatively stable, with limited disruption to working life and welfare systems. However, Finland’s role within NATO and the EU grows more influential as the EU takes a stronger stance on regional security.
Analysis: While this scenario is the least disruptive in economic terms, it signals a significant shift in global power dynamics. Finland must continue to modernize its defence infrastructure and focus on maintaining its position as a stable, secure hub within the EU.
2. China Dominates the World Economy
In this world order, China assumes a dominant position in global trade, as the US recedes from its role as the primary superpower. Russia, while still a concern, becomes more of a regional threat, particularly along Finland’s border. The rise of China leads to a more fragmented global trade system, forcing Finland to find new export partners and adapt to shifting trade alliances.
Finland’s defence budget again increases to 5% of GDP, but the economic landscape is significantly altered. As the EU and NATO’s cooperation weakens, Finland’s ability to leverage its Western partnerships diminishes. A strong economic relationship with China could help Finland balance Russia’s growing military presence, but it would also have to contend with the complexities of an increasingly multipolar world.
Analysis: Finland’s export-driven economy faces significant risk in this scenario. The country must diversify its trade partners and improve its strategic autonomy, especially in the energy sector, to ensure long-term stability. The geopolitical shift requires Finland to reevaluate its security and economic alliances.
3. Finland Caught in a Baltic War
A direct conflict between Russia and Europe spills over into the Baltics, with Finland strategically positioned but not the primary battlefield. The United States, focused on its own interests, scales back its involvement in European security, leaving NATO and the EU to fend for themselves. Russia attempts to assert greater control in the Baltic region, including threats to Finland’s territory.
Finland’s defence spending jumps to 10% of GDP, with a focus on securing essential goods and infrastructure. The country must prioritize military readiness, cybersecurity, and the stability of supply chains, especially in maritime transport. The turbulent situation in the Baltic Sea disrupts shipping routes, causing significant economic strain for Finland, which depends heavily on trade.
Analysis: In this scenario, Finland faces an existential challenge to its economy. The country must strengthen its maritime security and focus on securing its supply chains. Regional cooperation with the Nordic countries, the Baltics, and Poland becomes crucial to mitigating the impact of this conflict.
4. An Open War of Attrition
The worst-case scenario unfolds: the EU collapses, the US retreats into isolationism, and Finland becomes a primary battleground between Russia and a fractured Europe. With its economy in tatters and the war economy fully entrenched, Finland is forced to divert 35% of its GDP to defence. Unlike Ukraine, Finland is not the only target, but the cost to the Finnish people would be devastating.
In this bleak future, Finland faces a humanitarian and economic crisis of unprecedented scale. The country’s already weakened economy can barely sustain its military expenditure, and the social fabric begins to unravel under the pressure of sustained conflict. The lack of international support compounds the severity of the situation.
Analysis: This scenario represents a full-scale economic and social breakdown. Finland must focus on resilience, not just in military defence but in critical sectors like healthcare, energy, and food security. A comprehensive strategy for survival and recovery would be necessary, relying on domestic innovation and regional alliances.
What Finland Can Do Right Now
While these scenarios are concerning, they are not inevitable. Justus Joenaalto, a preparedness expert at Capful, emphasizes that Finland must invest in logistics, supply chain security, and infrastructure now, regardless of which future scenario unfolds. Given Finland’s geographical position, maritime transport and both domestic and international logistics must be safeguarded at all costs.
Joenaalto also suggests that Finland deepen its cooperation with neighbouring countries—particularly the Nordic nations, the Baltics, and Poland—to strengthen regional security and resilience. By diversifying its security partnerships and reinforcing its economic ties within the EU and beyond, Finland can better position itself to weather future challenges.
Looking Ahead: The Path to Preparedness
In our next article, we will explore specific steps Finland can take to fortify its economy and defence infrastructure, focusing on emerging technologies, innovation in logistics, and regional security initiatives. We will also examine Finland’s potential role in shaping the future of European defence and security, offering insights into the broader geopolitical landscape.
Stay connected with us at Nordic Business Journal for more in-depth analyses and expert opinions on Finland’s evolving security challenges. Share your thoughts, insights, and suggestions with us—together, we can continue to shape a resilient and secure future for Finland.
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