HELSINKI, Sept. 17 (Xinhua) -- Finland's economy is expected to grow 1.7 percent this year, two Finnish economic research institutes said Thursday, as stronger exports and investment support the recovery, while high unemployment and rising public debt remain major challenges.
The Research Institute of the Finnish Economy (Etla) forecast gross domestic product (GDP) growth of 1.7 percent in 2026, accelerating to 1.9 percent next year before slowing to 1.4 percent in 2028.
Labore, another Finnish economic research institute, also raised its 2026 growth forecast to 1.7 percent, up 0.8 percentage points from its spring estimate. It expects growth of 1.6 percent in 2027 and 1.5 percent in 2028.
Both institutes identified exports and investment as key growth drivers.
Etla expects Finnish exports to grow by 3.7 percent this year and 3 percent next year, supported by strong industrial order books, improved cost competitiveness and shipbuilding deliveries. Labore forecasts export growth of 4.7 percent this year.
Etla expects investment to rise by 5.4 percent this year and by more than 9 percent in 2027. Public investment is providing much of the boost this year, particularly through fighter jet procurement, while private investment is expected to take the lead next year, partly driven by major data center projects announced by Google earlier.
Private consumption is also recovering. Etla expects it to grow by 1.3 percent this year, although higher interest rates, living costs and continued household saving are limiting the rebound.
The labor market is expected to recover more slowly. Etla forecasts the unemployment rate at 10.5 percent this year before a gradual decline, while Labore puts it at 10.4 percent. Both expect employment conditions to improve as growth continues.
External risks remain significant. Etla Chief Economist Jenni Paakkonen said the Middle East conflicts have pushed up prices and costs and prompted a monetary policy response from the European Central Bank. Etla's forecast assumes that traffic through the Strait of Hormuz will return closer to pre-war levels in the coming years.
Etla warned that a faster-than-expected rise in interest rates, an escalation of geopolitical crises or the outbreak of new ones could weaken growth below its forecast.
Despite the improved growth outlook, both institutes warned that Finland's public finances remain under heavy pressure.
Labore expects public debt to reach 94.5 percent of GDP by 2028. Etla said the debt-to-GDP ratio will exceed 90 percent this year and shows no sign of stabilizing.
Etla Managing Director Aki Kangasharju called for measures to strengthen public finances, while stressing the need to invest in productivity and long-term growth.
