HELSINKI, Sept. 12 (Xinhua) -- The Bank of Finland on Friday forecast the country's economy to expand 0.3 percent in 2025, before growth strengthens to 1.3 percent in 2026 and 1.7 percent in 2027.
In its latest economic review, the central bank said inflation will remain moderate, while the current high unemployment should start to decline gradually from next year. Business conditions are projected to improve as investments increase and prospects brighten, while household spending is expected to recover on the back of higher wages and low inflation.
Official data show that unemployment stood at 9.3 percent in July, up from 7.9 percent a year earlier, according to Statistics Finland. Meanwhile, new manufacturing orders rose 11.7 percent year-on-year in the first seven months of 2025.
The bank cautioned that geopolitical tensions and trade tariffs continue to weigh on growth. Falling interest rates and higher defense spending are also expected to underpin demand.
Bank of Finland Governor Olli Rehn said rising defense expenditure will contribute to euro area growth, particularly in 2026-2027.
"The pressure on public finances caused by this expenditure, both in Finland and in Europe, can be reduced if investment is successfully directed to joint procurements and to activities that promote new technologies. Key to this are skilled individuals and the innovations they produce," Rehn said.
Finland's 2026 budget will include 6 billion euros (7.02 billion U.S. dollars) in new procurement authorizations to modernize its armed forces, with defense spending set to rise to at least 3 percent of GDP by 2029.
Rehn acknowledged that additional defense spending will inevitably raise public debt in the short term. "But the more growth this spending generates, the less significant the debt increase will be," he noted. (1 euro = 1.17 U.S. dollars) ■
