OP forecasts slow recovery of Finnish economy

The recovery of the Finnish economy, which began in 2024, faltered in 2025and the Gross Domestic Product (GDP) will grow by an average of 1.5 per cent in 2026–27, according to the economic forecast published by financial group OP Pohjola on Thursday.

The forecast is slightly lower than the previously estimated 1.8 per cent, said OP in a press release.

According to preliminary data, Finland's GDP in 2025 will not grow much from the previous year. Based on monthly data, the economy began to grow again at the end of last year, and it will recover to an average growth rate of 1.5 per cent in the following years.

"The biggest reason for the slower than previously predicted economic recovery is a more cautious estimate of the decline in the household saving rate. In summary, we can say that exports and investments are developing well, but consumption is recovering slowly," said Reijo Heiskanen, Chief Economist of OP Pohjola.

Exports grew by just over three per cent in 2025, and the pace will remain good in 2026–27.

As economic growth in northern Europe strengthens, export demand will recover faster than global economic growth. In addition, improved cost competitiveness and orders in the pipeline will support export development. The risk is an increase in trade barriers.

Private consumption stagnated in 2025. Consumption lagged behind income growth, and the saving rate rose. In 2026–27, the increase in real disposable income will enable consumption to recover. The saving rate is expected to decline slightly as concerns about unemployment subside, and households adjust to changed interest rates.

The saving rate in Finland is twice as high as the average of recent decades. The forecast level is the same as in 2019, before the fluctuations caused by the coronavirus pandemic.

Following the large fluctuations in recent years, the saving rate reflects greater uncertainty than usual. It is possible that the saving rate will remain permanently high, due to ageing, for example. This limits the cyclical recovery but may increase production potential in the longer term.

Investments will grow rapidly in 2026. Private investment will achieve a high pace, and public investment is increasing due to increased defence spending. Public investments will mainly be channelled into imports, so the impact on GDP will be minimal.

In the coming years, inflation will remain slightly below two per cent, which will support better development of cost competitiveness and purchasing power.

Employment began to grow at the end of last year, which will strengthen during the current year.

However, unemployment rose more than expected due to the increase in labour supply. In 2026, the supply of work will still be abundant. The unemployment rate will remain relatively high, although it will start to decline.

The economy's financing balance will improve slightly as the private sector saves less, and the public-sector deficit decreases. The public debt ratio will still increase.

"From the perspective of future economic growth, measures that reduce public debt and private-sector saving are more than welcome. However, economic growth cannot be relied on to balance the public sector, as only a small part of the deficit is cyclical in nature," Heiskanen added.

The Finnish economy's cyclical ups and downs are typically sharp, so the economy may recover more strongly if the saving rate falls faster than expected, for example. Similarly, uncertainty and setbacks in export markets may hinder economic recovery.