Trump’s policies force Europe to take action, which may also support Finland’s incipient economic growth
The recent upheavals in international relations may finally force Europe to strengthen its position in the global economy. In Finland, a genuine economic turnaround has yet to materialise, and therefore MuniFin has lowered its forecast for this year’s GDP growth from 2 percent to 1.5 percent. Nevertheless, there are also glimmers of hope that support economic recovery.
The Finnish GDP turned to moderate growth last year, but the growth was still fragile, and setbacks were experienced in the key drivers of the economic turnaround even before Donald Trump took office.
“Although foreign trade grew last year, exports slowed down towards the end of the year. Early signs of passing the bottom were seen in investments, but a genuine upward turn cannot yet be seen in last year’s actual data”, says MuniFin’s chief economist Timo Vesala.
The biggest disappointment has been the sluggishness of domestic consumption. After the inflation and interest rate shock subsided, the threat of unemployment and layoffs has kept consumer confidence weak, and the uncertainty in security policy certainly does not help.
“We have now lowered our estimate for Finland’s GDP growth this year to 1.5 percent. In particular, we have had to revise downwards the outlook for exports and investments. We are not yet making changes to the 2026 GDP forecast at this stage, but we are keeping the growth estimate at 2.0 percent”, Vesala says.
Especially the risks related to this year’s forecast are clearly downward due to the great political uncertainty.
Amidst pessimistic sentiments, it is important to note that there are also encouraging signs in the air.
“The decline in interest rates is important for the recovery of Finland’s economy. The fall in market interest rates has not yet fully translated into lower interest expenses for borrowers, and if there are no new benefit cuts in the spring budget session, there is potential for recovery in domestic consumption. Lower interest rates also facilitate the progress of green transition projects”, Vesala points out.
At the same time, Finland’s defence industry and businesses relating to it are gathering strong growth momentum as European countries are quickly forced to strengthen their armed forces.
“Trump’s ruthless policies may ultimately be the decisive push that forces Europe into the long-awaited action. Europe has both the economic and intellectual capacity to do better, whether it is strengthening defence and energy supply, easing the regulatory environment, or tightening the EU’s internal market”, Vesala notes.