Bank of Finland economic forecast shows slower growth in 2026 as rising energy costs linked to the Iran war and global market uncertainty reshape the outlook. The central bank now expects the Finnish economy to grow by just 0.6 per cent this year, down from previous projections, reflecting a shift from the moderate recovery seen at the end of 2025 driven by private consumption and investment.
The central bank highlighted that energy price increases are now a significant drag on growth. Disruptions to oil and gas flows from the Persian Gulf have driven fuel prices higher, creating knock-on effects across consumer goods and industrial production. “Energy price increases slow growth,” said Juuso Vanhala, head of forecasts at the Bank of Finland, noting that global developments could quickly alter the outlook.
Inflation, which eased in 2025, is expected to rise to 1.9 per cent in 2026. It is projected to fall to 1.5 per cent in 2027 before climbing slightly to 1.8 per cent by 2028. These projections hinge on the duration of energy supply disruptions and the degree to which their impact spreads across the economy. Rising fuel costs have already fed into consumer prices, with potential effects on food and industrial goods anticipated in the coming months. “Energy costs raise consumer prices this year, but the effect next year depends on the duration of supply disruptions,” Vanhala said.
Beyond energy, the Bank of Finland identified other risks for the Finnish economy. Geopolitical tensions, including the war in Ukraine and trade uncertainties linked to shifts in United States tariff policy, continue to put pressure on global markets. These factors could influence both investment and consumption, adding layers of complexity to the economic recovery.
Labour market conditions show cautious improvement despite a weak performance in 2025. The unemployment rate is projected at 10.2 per cent in 2026, decreasing to 9.7 per cent in 2027 and 9.2 per cent by 2028, reflecting gradual stabilization.
Overall, the Bank of Finland economic forecast paints a picture of measured growth under pressure from energy shocks and geopolitical uncertainty. Policymakers and businesses will need to navigate a period where fuel costs, inflationary pressures, and global tensions intersect, shaping the pace and quality of Finland’s economic recovery.
