OP forecasts decline of Finnish economy this year, growth in 2025

Finnish gross domestic product (GDP) is predicted to decrease by 0.5 per cent in 2024 but to grow by 2.0 per cent in 2025, according to the most recent forecasts published by OP Financial Group on Wednesday.

OP’s economists leave their forecasts of Finland’s economic growth unchanged, said OP in a press release.

The Finnish economy is showing signs of improvement. OP’s economists expect the economy to grow by 0.5 per cent from the previous year during the latter half of the year.

For the entire year, however, GDP will decrease by 0.5 per cent in 2024, as it decreased in the first half of the year.

In 2025, the recovery will speed up and the economy will grow by an average of 2.0 per cent.

In 2026, economic growth is estimated to settle to 1.3 per cent, which is the expected longer-term average growth rate.

“The economy has continued to develop as expected, and the conditions for recovery have improved. In the domestic market, the momentum is even better than estimated. Risks are especially associated with the development of export markets”, said Reijo Heiskanen, Chief Economist of OP Financial Group.

This year, the economy has mainly been supported by consumer demand.

Investments have decreased heavily and exports slightly. Next year, all demand components will increase.

Consumer spending has rebounded after a slow spring and early summer based on information such as payment card data. Also, the growth prospects for spending have strengthened.

Inflation will remain at 1.6 per cent next year, and real wages will continue to increase. The falling interest rate will support the decrease in consumer savings ratio, and consumer spending will increase next year slightly faster than the real disposable income.

In recent years, exports have developed quite steadily, when considering the development of export demand and the collapse of trade with Russia. Next year, exports will increase as the manufacturing industry prospects improve and service exports recover.

Investments have plummeted together with construction. Construction industry is currently at its all-time low, and construction investments will grow quite noticeably next year. The level of construction is still below the average of the past decades.

In the next few years, inflation is expected to remain under two per cent. This supports the wage settlements securing the cost competitiveness which might improve the share of exports.

Unemployment will gradually start to decrease and the employment rate will increase.

According to the forecast, neither of these will reach the previous peak of the economic cycle in 2026. The Government deficit will decrease to match the structural deficit of about two per cent of GDP.

“In the forecast, the economy will reach the longer-term average growth rate after the recovery phase. This does not improve structural unemployment nor balance government deficit, even though our estimate of longer-term growth prospects is faster than the average from the previous decade”, Heiskanen added.