Finland’s economy at a turning point
The Finnish economy is forecast to grow at a gradually increasing rate in the immediate years ahead. However, the energy crisis resulting from the Middle East conflict will cast a shadow over this, slowing growth and driving up inflation, especially in the short term.
The Bank of Finland has today published its forecast for the Finnish economy for the period 2026–2028. The economy will grow this year by 0.7%. Growth will rise to 1.2% in 2027 and to 1.4% in 2028. The recovery in the economy will be underpinned by export and investment growth and by a gradual rise in private consumption. “The Finnish economy is regaining strength. Private consumption was trailing for a long time but picked up in the early months of this year, and exports and investment are also increasing. Uncertainty nevertheless surrounds the recovery, and the Middle East conflict in particular is slowing growth,” says the Bank of Finland's Head of Forecasting, Juuso Vanhala.
Energy crisis driving up inflation
Finland's inflation rate is projected to rise to 2.4% for 2026, due to the increase in energy prices. The increase in energy prices is assumed to be short-lived, and so inflation will fall in 2027 to 1.6%. In 2028, inflation will edge up slightly to 1.8%. “Although higher energy prices will become evident as an increase in consumer prices, the impacts are expected to be temporary,” says Vanhala.
Private consumption picking up and growth in the economy will be supported by investment
Private consumption has started to grow, and this growth is expected to gather pace in the years ahead. Consumption will be underpinned by an earnings increase and an improved employment rate, but will be curbed by uncertainty and higher market interest rates. Despite growth in consumption, households will also build up their savings during the years of the forecast.
Investment, particularly in data centres, the green transition and the defence industry, will boost private investment growth. The recovery in residential construction, on the other hand, will be slow, and the coming years will not see a return to the peak housing production volumes of earlier years.
Export growth will continue to be reasonably brisk. The international environment will nevertheless remain challenging, and subdued growth in the euro area economy in particular will slow the growth in Finland’s export markets. “Geopolitical uncertainty is considerable, but signs of a pick-up can also be seen. For instance, there is very active investment in artificial intelligence and data centres around the world, and such international investment will also support Finland's exports,” says Vanhala.
Unemployment will fall slowly and the public finances will be significantly in deficit
The labour market is still difficult. The unemployment rate has risen to a markedly high level but will gradually fall as the economy recovers, declining to 9.0% by the end of the forecast period. Employment will improve steadily in the immediate years ahead as the economy picks up.
Finland's public finances will remain significantly in deficit. General government debt will increase this year to almost 92% of gross domestic product (GDP) and will rise to a little under 97% in 2028.
The economic forecast is surrounded by uncertainties, especially regarding the situation in the Middle East. There is also continuing uncertainty over the trade policy of the United States. Economic growth may nevertheless still produce a positive surprise, especially if the geopolitical situation improves quickly.