Economic Forecasts Revised Upward: OP Pohjola Also Expects Two Percent Growth

Finland's economic outlook has seen a significant upward revision, with major financial institutions now projecting stronger growth than previously anticipated. OP Pohjola economists have raised their forecast to 2% for both the current year and 2025, a notable increase from their earlier prediction of just 1% growth.

This adjustment aligns with a similar revision by Aktia, which now forecasts 2.1% growth. These updated predictions suggest a more robust economic performance than was expected earlier in the spring, when concerns about the Middle East crisis, rising energy prices, and interest rates threatened to dampen initial growth.

According to Reijo Heiskanen, chief economist at OP Pohjola, the economic turnaround has been underway for some time. Statistics Finland revised its earlier figures upward over the summer, indicating that the economic situation has been better than previously understood. Preliminary data shows that the Finnish economy grew by an average of approximately 2% in the first half of the year compared to the previous year.

Heiskanen notes that the impact of the Middle East crisis has been less severe than initially feared. He considers the 2% growth forecast to be conservative, reflecting the current realized level of economic activity. The growth is expected to continue at a similar pace, driven primarily by an increase in investments. "The economy has gradually recovered and is now also gaining traction in the domestic market. The recovery is now broader-based and strengthening," Heiskanen stated.

Despite the positive revisions, Heiskanen cautions against excessive optimism, stating that the economy is not yet in a strong upswing but rather experiencing gradual growth. He points out that inflation and interest rates have risen due to the war, contributing to uncertainty in the labor market. Nevertheless, he deems 2% growth to be good, especially considering that Finland's economy has averaged only 1% growth over the past decade. A true boom would require growth rates of 3-4%, which remains a possibility under the most favorable scenarios.