OP forecasts 2% growth of Finnish economy despite unemployment rise

The Finnish economy is expected to grow by 2% this year and next year, according to a forecast published by OP Financial Group on Thursday.

In the spring, growth was forecast at 1% for this year and 1.5% for next year. On average, economic growth in 2026–2027 will reach its best pace since 2017–2018.

According to preliminary data, the Finnish economy grew by an average of about 2% in January–June year on year.

OP economists said that economic growth will continue on a fairly broad basis in the latter half of this year and next year.

"The war in the Middle East has not weakened economic development as much as was feared. The Finnish economy is well placed to grow at a good pace also next year, provided the geopolitical situation calms down as expected. The export and investment outlook is positive, and as confidence increases, so can household investments," said OP Pohjola's Chief Economist Reijo Heiskanen.

Exports have been growing at a good pace already for two years and will continue to do so in 2027. The reason for this is the reviving global economy and better cost competitiveness of export.

Investments have grown well this year, driven by both businesses and public procurements. Next year, as housing construction will pick up, investments will be greater and grow at a good pace, although public investments will not continue to grow.

Private consumption shrank last year after two years of no change. Private consumption began to recover early this year, and this positive development is set to continue.

Next year, consumption will be boosted by higher real disposable income and higher confidence. Saving rate will fall from the high level it had risen, but will remain higher than the long-term average.

Inflation rose temporarily owing to the war in the Middle East as energy prices rose.

However, inflation is moderate in Finland. Consumer price inflation will settle in the coming years at about 2%, which corresponds to the euro area target.

Unemployment rose in the first half of the year although the economy has recovered.

It is typical for the labour market to respond with a delay. However, as the economy is recovering, the labour market will pick up as well. Unemployment will reduce clearly, even though the level will still remain high next year.

Finland's current account will remain in surplus thanks to strong exports, although imports will increase due to defence procurements.

The government deficit, on the other hand, will increase this year as a result of higher defence expenditure and tax cuts. The deficit will reduce in the coming years but will remain too high.

"The problems with the Finnish economy are high structural unemployment and public deficit. Even a strong upswing alone will not fix these problems," said Heiskanen.