After growing by a modest 0.2% in 2025, Finland’s GDP growth is projected to accelerate slightly, reaching 0.8% in 2026 and 1.4% in 2027. Domestic demand is expected to lead GDP growth in 2026–27, in contrast to 2025 when net exports drove economic expansion. Inflation is projected to rise to 2.4% in 2026 before easing to 1.9% in 2027. Public spending is set to grow modestly amid fiscal consolidation, though defence investment is expected to surge from 2026 onwards. The deficit is forecast to widen from 3.4% of GDP in 2025 to 4.5% in 2026, and remain high at 4.6% in 2027. Public debt is projected to continue rising, reaching 93.1% of GDP by 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 0.2 | 0.8 | 1.4 |
| Inflation (%, yoy) | 1.8 | 2.4 | 1.9 |
| Unemployment (%) | 9.7 | 10.1 | 9.8 |
| General government balance (% of GDP) | -3.4 | -4.5 | -4.6 |
| Gross public debt (% of GDP) | 88.5 | 91.2 | 93.1 |
| Current account balance (% of GDP) | 1.3 | 0.1 | 0.2 |
Economy to expand thanks to increasing domestic demand
In 2025, Finland’s economy grew by a modest 0.2% as the country experienced a technical recession in the second and third quarters. Private and public consumption acted as a drag while growing exports supported GDP expansion. In 2026-Q1, GDP growth exceeded expectations at 0.9% q-o-q, driven by services, retail sales, industrial production, and imports. However, exports fell. Looking ahead, the conflict in the Middle East is likely to weigh on activity in Q2 and onwards, particularly through higher energy prices and greater uncertainty. Overall, real GDP is expected to expand by 0.8% in 2026, driven by domestic demand. Economic growth is projected to reach 1.4% in 2027, supported by both net exports and domestic demand.
After declining for three years, private consumption is expected to increase by 0.6% in 2026, supported by rising disposable income. Household income growth is driven by the significant wage increases agreed for 2025-27, totalling approximately 8%, and an increase in employment. However, several headwinds persist: the household savings rate is projected to remain high, reflecting weak consumer confidence due to high unemployment and uncertainty about the economic outlook. The conflict in the Middle East has led to an increase in fuel prices although Finland’s relatively low reliance on fossil fuels is set to soften the energy price shock compared to other EU countries. The expected increase in policy interest rates in the euro area will increase loan servicing costs for households, many of whom hold variable-rate mortgages. The stalled housing market recovery may also curb spending by reducing perceived household wealth. In 2027, consumption growth is projected to accelerate as employment and income growth rise and inflation decelerates.
Investment is set to rise in 2026, driven by a significant boost in machinery and equipment spending—including the arrival of the first batch of Finland’s 64 F-35 fighter jets (with deliveries continuing until 2030). Data centre construction is also surging, further supporting equipment and infrastructure investment. However, residential investment remains weak in 2026 due to falling house prices and higher interest rates, with only a modest recovery expected in 2027.
Increasing domestic demand, including for defence and data centre equipment, is set to lift import growth above export growth in 2026, before moderating in 2027. As a result, the growth contribution of net exports is forecast to turn negative in 2026, following several years of positive contribution. Exports are nevertheless expected to continue growing on the back of robust export order books in 2026 and 2027, albeit at a slower rate than in 2025.
Employment to expand as price pressures moderate
The unemployment rate was 10.5% in March 2026, largely due to increased labour force participation and low labour demand amid weak economic activity. As the economy starts to recover, employment is expected to increase gradually, by 0.2% in 2026 and 0.5% in 2027, after a decline of 0.5% in 2025. Unemployment is expected to average 10.1% in 2026 and 9.8% in 2027.
Annual inflation is forecast to increase to 2.4% on average in 2026, up from 1.8% in 2025. In early 2026, electricity prices spiked due to adverse weather conditions, though services inflation slowed. While the electricity price hike is expected to be temporary, rising oil prices are set to push transport fuel costs up this year. Annual inflation is forecast to ease slightly to 1.9% in 2027 as price pressures subside.
Public finances remain under pressure
In 2026, the general government deficit is expected to reach 4.5% of GDP, up from 3.4% in 2025. Expenditure growth is driven by the large delivery of F-35 fighter jets, increasing interest payments, and higher compensation of employees as a result of recent wage agreements covering the period 2025-28. The freeze on the indexation of certain social transfers—such as the basic unemployment allowance—adopted in 2023 is expected to contain expenditure growth until 2027. In terms of revenue, growth is expected to be supported by a mild expansion in the economy and higher social contributions, although the weak labour market situation will limit income tax receipts. Planned personal income tax cuts are expected to further weigh on revenue growth. As a result of these developments, the fiscal stance is expected to be expansionary in 2026.
In 2027, although stronger economic growth supports the fiscal position, a corporate income tax cut and further investment in defence suggest that the deficit will be 4.6% of GDP.
The debt-to-GDP ratio reached 88.5% in 2025 and is forecast to increase to 91.2% in 2026 and 93.1% in 2027 due to persistent large deficits.