HELSINKI, March 24 (Xinhua) -- The Bank of Finland on Tuesday lowered its forecast for economic growth over 2026-2028, saying an energy shock caused by tensions in the Middle East was weakening the outlook.
Finland's economy is now expected to grow by 0.6 percent in 2026, down from the 0.8 percent forecast in December. Growth is projected to pick up to 1.4 percent in 2027 and 1.5 percent in 2028.
The central bank said the Finnish economy had started to recover at the end of 2025, supported by private consumption and investment, and that growth continued in early 2026. But rising energy prices have since darkened the outlook.
"The energy shock will push up prices, but the effects on inflation will depend heavily on the duration of the energy supply disruptions. Unemployment will start to decline this year," the bank said in an interim forecast release.
The bank said uncertainty surrounding tensions in the Middle East, the continuing Russia-Ukraine crisis and changes in U.S. tariff policy were clouding the outlook.
"Despite the slowdown, growth is projected to continue. However, the outlook can change rapidly in the current global environment," said Juuso Vanhala, the Bank of Finland's head of forecasting.
Inflation is forecast to rise to 1.9 percent in 2026, before easing to 1.5 percent in 2027 and edging up to 1.8 percent toward the end of the forecast period.
According to the bank, the suspension of oil and natural gas shipments in the Persian Gulf will lift fuel prices in Finland in particular, with the effects expected to feed through more gradually into the prices of food and industrial goods. The forecast assumes, however, that the energy shock will be relatively short-lived and that its wider impact on prices will remain moderate.
The unemployment rate is projected at 10.2 percent in 2026. The bank said labor market conditions should improve as the business cycle strengthens, with unemployment seen falling to 9.7 percent in 2027 and 9.2 percent in 2028.
The forecast also included alternative scenarios pointing to higher inflation and weaker growth. A prolonged disruption to energy supplies could push up prices faster and weigh on growth for several years, it said.
The United States and Israel launched massive attacks on Iran on Feb. 28, disrupting global shipping, sending oil prices soaring and shaking the global economy. ■