Key cyclical drivers indicate a turnaround for Finland
The recovery of the Finnish economy has been long awaited, but signs of a shift are now emerging, according to MuniFin’s latest economic forecast.
The performance of Finland’s economy for the current year is set to fall short of forecasts. Gross domestic product has declined, even though recovery elsewhere in the euro area is already gaining momentum. Due to these disappointing growth figures, MuniFin is lowering its estimate for GDP growth in 2025 to 0.3 per cent, down from the previous 0.5 per cent.
“The greatest surprise has been the sluggishness of private consumption, despite clearly lower interest rates and improved purchasing power. The forecasts may have underestimated the length of the shock caused by the sudden rise in prices and interest rates in 2022–2023. The simultaneous sharp rise in several essential expenditure items is not easily forgotten and may still be reflected in cautious consumer behaviour”, assesses MuniFin’s Chief Economist, Timo Vesala.
Consumer confidence in Finland is also weakened by the prolonged gloom in the housing market and increased competition for jobs.
“One less recognised factor restraining the Finnish economy this year has been savings in public service provision and investments. Without the contraction in public demand, this year’s GDP would be in positive territory”, Vesala notes.
Despite the bleak GDP figures, there are signs of a turnaround in the economy.
“Traditional cyclical drivers, exports and private investments, have been on the rise for some time. The growth in real incomes should gradually turn private consumption upwards, even if households remain cautious.”
However, as 2026 begins from weaker-than-expected starting point, MuniFin is lowering next year’s growth forecast from two per cent to 1.5 per cent. In 2027, growth is expected to strengthen to two per cent.
Although there is now more confidence in the recovery, global economic uncertainty keeps cyclical risks elevated, Vesala warns.
“The ultimate effects of Donald Trump’s tariff policies are still difficult to assess, and geopolitical tensions may give rise to new crises. In addition, overheating in AI investments increases risks in the stock markets.”