Danske Bank has cut its 2026 growth forecast for Finland to 1.1% from 1.5% and more than halved its 2027 forecast to 0.8% from 1.9%, citing higher energy prices, rising interest rates and renewed uncertainty following the disruption to global energy markets.
The shift marks a clear change from the more optimistic outlook seen earlier this year, even as exports, industrial activity and data center investments continue to support growth, according to the Nordic Outlook report published today.
The downgrade comes after a surprisingly strong start to the year. Finland's economy expanded by 0.9% in the first quarter, the fastest quarterly growth rate since 2021. The recovery that began in late 2025 had been gaining traction, supported by improving manufacturing activity and resilient export demand.
The main drag on the outlook is households. Higher fuel costs and rising mortgage rates are reducing purchasing power, while consumer confidence remains weak. Although real earnings are expected to continue growing and inflation is forecast to remain below 2% on average in both 2026 and 2027, the labor market remains soft. Danske Bank expects unemployment to average 10.5% this year and 10.1% next year.
The housing sector continues to weigh on growth. Residential construction remains close to post-financial-crisis lows, new building permits are scarce, and house prices are expected to fall 2.8% this year before recovering modestly in 2027. Housing transactions and mortgage lending have improved from their lows, but activity remains subdued.
Elsewhere, the picture is stronger. Manufacturing order books have improved, particularly in the metals industry, where new orders are approaching the peak levels seen in 2022. Finnish exports have remained resilient despite trade tensions, while competitiveness has improved relative to many European peers.
One of the clearest shifts is in investment. Construction permits for transport and communications buildings, a category increasingly driven by data center projects, have risen sharply while residential permits remain depressed. Outside construction, private investment volumes were nearly 20% above pre-pandemic levels at the end of 2025.
The result is an increasingly uneven economy. Manufacturing, exports and data center investments are providing support for growth, while housing activity and the labor market continue to lag behind.
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