S-Bank economist Janne Ronkanen, in the latest edition of Talouden Suunta, projects that Finland’s economy will expand in 2026, driven primarily by investment growth, alongside a gradual rebound in private consumption. However, this nascent growth remains fragile, with geopolitical tensions and other uncertainties potentially constraining the recovery. Consequently, S-Bank has revised down its GDP growth forecast for 2026 to 0.9%, compared with an earlier estimate of 1.3%. Growth is expected to accelerate to 1.5% in 2027.

Early Signs of Recovery
After a prolonged period of economic stagnation, Finland is showing initial signs of recovery. Late 2025 data indicated a 0.3% GDP increase from the previous quarter, supported by rising investments, while private consumption returned to positive year-on-year growth for the first time in over a year. Labor market indicators also point to modest improvement, with employment gains emerging in the private sector. Business confidence has steadily strengthened over the past two years, particularly in the industrial sector.

“The domestic market is finally showing signs of awakening from a long downturn,” Ronkanen notes.

Risks and Uncertainty
Despite early positive signals, uncertainty continues to cloud the economic outlook. Rising energy prices and volatility in interest rates—driven by broader global market expectations—pose risks to consumption and investment decisions. S-Bank emphasizes that the persistence and severity of external geopolitical events could have a material impact on Finland’s growth trajectory, with potential spillover effects on price pressures beyond the energy sector.

Household Consumption Outlook
Finnish households face a mixed situation. Real incomes have strengthened over the past two years, and bank deposits remain substantial, yet segments of the population are affected by unemployment or perceive higher job insecurity. Consequently, households have continued to prioritize savings over consumption.

Late 2025 data signaled a cautious recovery in private spending, reflected in retail and wholesale trade figures, which posted positive year-on-year growth for the first time in over three years. S-Bank anticipates private consumption will grow by 0.8% in 2026 and 1.5% in 2027, marking a gradual recovery from modest contractions over the previous three years.

Interest Rate Environment
Eurozone financial conditions have shifted notably in March, with energy price volatility and inflation expectations prompting markets to price in multiple European Central Bank (ECB) rate hikes in 2026. S-Bank’s base scenario projects a first deposit rate increase to 2.25% in June, while acknowledging that heightened uncertainty could accelerate or delay adjustments. Euribor rates have already reflected these expectations, with the 12-month Euribor rising from approximately 2.20% at the end of February to 2.658% by March 20.

Ronkanen underscores that ongoing monitoring of inflation pressures—particularly their potential spread beyond energy—will be critical for anticipating the ECB’s policy trajectory.