Nordea forecasts Finnish economic growth despite fuel price hike

The Finnish economy has grown broadly in the first half of the year, with private consumption, investment and exports all contributing, said Nordea Bank said in a press release on Wednesday, citing its latest economic outlook.

“We expect growth to continue despite higher fuel prices and interest rates resulting from the Middle East conflict,” said Nordea in the press release, adding that the recovery is set to pass through to the labour and housing markets with a lag.

The bank raised its forecast for Finland's economic growth this year to 1.7 percent from 1 percent, reported Xinhua.

The bank expects Finland's gross domestic product (GDP) to grow by 2 percent in both 2027 and 2028.

Nordea said the Finnish economy has expanded on a broad front this year despite uncertainty stemming from the conflict in the Middle East, inflation and higher interest rates.

Growth has been supported by strong industrial activity, recovering investment and a gradual pickup in household consumption.

Finland's export sector has maintained strong momentum since last year, particularly in the metal, defense and maritime industries, Nordea said. Rising export orders point to continued strength in industrial activity next year.

The global artificial intelligence boom has also boosted demand for semiconductors and physical infrastructure such as data centers.

Nordea said Finland has benefited through both exports and foreign investment in data centers, which has helped support the domestic construction sector after several difficult years.

The outlook said that the global economy is demonstrating remarkable resilience in the face of geopolitical conflict, elevated energy prices and trade tensions.

Meanwhile, tighter monetary policy from both the ECB and the Fed continues to weigh on financial markets, driving long-term yields in many countries to their highest levels in 15 years.

The US dollar is depreciating, while the Nordic economies continue to outperform, said Helge Pedersen, Nordea Group Chief Economist.

The bank has broadly maintained its global growth forecast in line with May projection: expecting growth of approximately 3% in both 2026 and 2027.

For 2028, covered for the first time in the current forecast, the bank projected global growth of 3.2% and continued to assess the balance of risks as tilted to the downside.

Despite higher energy prices and geopolitical uncertainty, the Danish economy continues to grow at a solid pace.

Growth is broadening beyond pharmaceuticals, and Nordea expects this trend to continue.

However, public finances are facing growing pressure, and the current account surplus is gradually narrowing.

In Norway, underlying inflation is likely to pick up again and remain around 3% until year-end, indicating that Norges Bank has yet to reach its inflation target.

“We expect one more rate hike this autumn, and no rate cuts until 2028. Slightly higher rates and declining petroleum investment will weigh on growth and lift unemployment modestly,” said Nordea.

The Swedish economy has normalised, with growth driven by stronger exports and firmer domestic demand.

Resource utilisation is increasing, unemployment is declining and inflation could rise to around 2% next year.

The Riksbank is expected to raise its policy rate, while the SEK gradually strengthens over the forecast period.