Finland's economy forecasts modest growth amid Middle East conflict

Finland's gross domestic product expanded 0.9 % in the first quarter of the year, a modest gain that follows a prolonged period of weak growth. Analysts attribute the limited increase to recent government fiscal cuts and weakened domestic demand, especially among low‑income households.

The Bank of Finland released its medium‑term outlook, projecting growth of 0.7 % in 2026, accelerating to 1.2 % in 2027 and 1.4 % in 2028. The forecast notes that the ongoing Middle‑East conflict is driving an energy price surge that pushes inflation to 2.4 % in 2026, before easing to 1.6 % in 2027 and rising slightly to 1.8 % in 2028. Private consumption is expected to recover gradually, supported by higher wages and improving employment, while investment in data centres, green transition projects and defence is set to boost the economy. Unemployment is projected to fall to about 9 % by the end of the forecast horizon, and public debt is forecast to rise to roughly 92 % of GDP in 2026, remaining under 97 % through 2028. The outlook emphasizes that geopolitical uncertainty, particularly the energy crisis, remains a key risk to the recovery.