Finland’s economic recovery will be further delayed as rising energy prices caused by the crisis in the Middle East weigh on growth, household purchasing power and exports, reported Xinhua, quoting the Finnish Ministry of Finance on Thursday.
In its latest economic forecast, the ministry projected Finland’s gross domestic product (GDP) to grow by 0.6 percent in 2026, down from the 1.1 percent forecast in December. GDP is expected to grow by 1.7 percent in both 2027 and 2028.
The ministry said the forecast assumes that the Middle East crisis will be short-lived, will not have major spillover effects on commodity prices and not lead to significant fiscal tightening in the euro area.
“When it comes to the economic situation, the only thing we know for sure is that the crisis in the Middle East is increasing instability and uncertainty, hindering economic growth and driving inflation in Finland this year,” said Mikko Spolander, director general of the economics department at the ministry.
“We must hope that the crisis is resolved quickly and with little damage. The crisis is adding to the challenges already facing Finland’s public finances,” he said.
The forecast also includes a less favorable scenario based on a prolonged crisis in the Middle East. Under that scenario, a 30-percent rise in oil prices would reduce Finnish economic growth to zero, the ministry warned.
While pay rises and tax cuts are supporting incomes, higher energy prices, weak employment, economic uncertainty and fiscal adjustment are making households more cautious, leading to postponed consumption and higher savings rates, according to the ministry.
Higher energy prices are also weighing on demand in Finland’s export markets, which is expected to hurt Finnish exports this year, the ministry added.
