5 days Ago
“The outlook is now driven by erratic political decisions rather than economics alone. This uncertainty could persist for a long time,” Heiskanen said in the group’s latest economic review. OP estimates that the full annual loss to Finland’s economy from the tariffs could exceed €4 billion at 2025 levels.
While global interest rate cuts and fiscal stimulus in Germany support growth, they are insufficient to counterbalance the trade-related decline. OP economists now see zero growth in goods exports in 2025, compared to earlier expectations of a 3 percent rise. Service exports are expected to remain the only positive driver of overall trade.
The updated forecast sees GDP rising 1.5 percent in 2026, with the economy rebounding after the initial shock. However, the growth trajectory is unlikely to recover fully from the setback.
Despite higher real wages, household confidence is weak. Consumption is expected to grow modestly in line with disposable income, as savings rates remain elevated. OP anticipates that lower interest rates and recovering trust will support stronger consumption growth in 2026.
Private investment is forecast to improve next year, particularly in sectors tied to energy production, artificial intelligence, and digital infrastructure. Construction activity is already rebounding from its lowest point. Inflation remains below the eurozone average, supporting wage moderation and export competitiveness.
Labour markets, however, will recover more slowly. The unemployment rate is not expected to fall significantly until 2026. While employment begins to improve, the employment rate will not rise due to demographic factors.
Public finances remain in deficit. The slow growth outlook and rising defence expenditure will continue to weigh on state budgets in 2025. Improvement in the balance is projected for 2026 but will require additional government measures.
OP compares the current global economic environment to the early 2000s downturn. Global GDP growth is expected to reach only 2.5 percent in 2025 and 2.
9 percent in 2026, down from earlier estimates of 3 percent. The United States is forecast to grow just 1.0 percent in 2025 and 1.
3 percent in 2026. U.S.
tariffs are the most extensive and are also contributing to faster inflation domestically, while in Europe the inflationary effect is expected to be smaller. Tomi Kortela , OP’s lead economist, said the European Central Bank is now likely to continue lowering rates. “Eurozone growth is weak, and inflation risks are declining.
Interest rate cuts, previously uncertain, are now becoming likely,” he said. While uncertainty remains high, Kortela noted the possibility of upside surprises. “Tariffs may end up lower than announced, and there may be positive developments, such as de-escalation in Ukraine.
In that case, the economic setback could be short and mild.” HT.
