PUBLISHED May 28, 2026
The Broad Picture: Recovery That Is Real but Still Below Average
According to “Suhdannebarometri – huhtikuu 2026”, published by the Confederation of Finnish Industries (EK) in April 2026, Finnish business conditions improved somewhat in the early months of 2026, but the current situation remains below average — particularly in construction and also in services. The survey, which gathered responses from 1,157 companies employing approximately 285,000 people in Finland, paints a picture of an economy in the early stages of recovery from an extended period of weakness, now facing a more uncertain international environment than existed even three months ago.
Overall business production grew at a moderate pace in the first quarter. The expectation is that this growth will continue into the spring and the third quarter, with industry performing relatively well. But the broader confidence picture is cautious: no significant improvement in the general business situation is forecast for any of the main sectors over the near term, and expectations for the coming months have turned more guarded since the previous survey.
Finland’s Specific Exposure to the Iran War
The EK barometer situates its findings within a careful assessment of the global environment, and one passage deserves particular attention. While Finland’s direct exposure to fossil fuel price shocks is described as below average — the country’s economy is less dependent on fossil energy than most — the report identifies a specific vulnerability that is distinctly Finnish: the sensitivity of the economy to rapid interest rate increases.
Finland has one of the highest rates of variable-rate mortgage borrowing in Europe. A very large share of Finnish household debt is on floating interest rates, meaning that ECB rate increases flow through almost immediately into household debt service costs — compressing disposable income, discouraging consumption, and weighing on residential construction and property values. This stands in contrast to countries like France or Belgium, where fixed-rate mortgages are more common and the pass-through from ECB rate decisions to household cash flows is slower and smoother.
The implication is significant: if the Iran War drives energy prices higher and those higher prices translate into accelerated ECB rate increases, Finland’s households would face a double squeeze — higher living costs from energy and higher debt service costs from rates — that the country’s Nordic neighbours, with their monetary policy independence, would not experience to the same degree.
Industry: The Bright Spot, With Caveats
Finnish industry is the most positive element of the April barometer. Manufacturing conditions improved in the second half of 2025 and continued to strengthen in early 2026. Production grew fairly strongly in the first quarter — more strongly, the barometer notes, than the previous quarter’s survey had expected. The expectation is that moderate growth will continue in the near term.
Order books improved in the first quarter, though they are still described as somewhat below the historical average. Inventory levels remained close to normal. Profitability improved modestly in the first quarter, and a small improvement is forecast for the near term. Employment in industry grew slightly in early 2026 and a small further increase is expected.
There are, however, clear warning signs within the industrial picture. Demand weakness is still the most frequently cited constraint on activity — named by a clear majority of firms as the primary obstacle to growth, even if its prevalence has declined somewhat as demand conditions gradually strengthened. Labour shortages affect 10 percent of industrial respondents. And the outlook for selling prices shows clear acceleration, while input cost growth is also expected to quicken — a dynamic that will compress margins if pricing power is insufficient to keep pace with cost inflation.
If industry is Finland’s bright spot, construction remains its darkest corner. The sector’s business conditions have remained dramatically weaker than other major sectors — a pattern that has persisted throughout the post-pandemic correction period and has not yet fundamentally reversed. Early 2026 saw a modest improvement, but no significant positive turning point.
The order book for construction has improved slightly but remains clearly below the historical average. Profitability is expected to weaken further, as cost increases accelerate. Workforce levels continued to decline gradually in early 2026, though the barometer suggests that this contraction may nearly come to an end in the coming months.
The proportion of construction firms citing weak demand as a constraint on activity stands at nearly two-thirds — a very high level that reflects the continued depression in residential housing activity. Finland’s residential construction market has been in severe decline since 2022 as interest rates rose, and the recovery has been painfully slow. The stock of unsold new apartments — a key indicator tracked in the barometer — remains at elevated levels, preventing developers from launching new projects and keeping the sector in a holding pattern.
Labour shortages, paradoxically, affect 22 percent of construction respondents — a higher rate than in industry despite the sector’s severe overall weakness. This reflects the sector-specific nature of construction skills: even with overall activity suppressed, specialist tradespeople remain in short supply, pointing to a structural mismatch rather than a purely cyclical problem.
If industry is Finland’s bright spot, construction remains its darkest corner. The sector’s business conditions have remained dramatically weaker than other major sectors — a pattern that has persisted throughout the post-pandemic correction period and has not yet fundamentally reversed. Early 2026 saw a modest improvement, but no significant positive turning point.
The order book for construction has improved slightly but remains clearly below the historical average. Profitability is expected to weaken further, as cost increases accelerate. Workforce levels continued to decline gradually in early 2026, though the barometer suggests that this contraction may nearly come to an end in the coming months.
The proportion of construction firms citing weak demand as a constraint on activity stands at nearly two-thirds — a very high level that reflects the continued depression in residential housing activity. Finland’s residential construction market has been in severe decline since 2022 as interest rates rose, and the recovery has been painfully slow. The stock of unsold new apartments — a key indicator tracked in the barometer — remains at elevated levels, preventing developers from launching new projects and keeping the sector in a holding pattern.
Labour shortages, paradoxically, affect 22 percent of construction respondents — a higher rate than in industry despite the sector’s severe overall weakness. This reflects the sector-specific nature of construction skills: even with overall activity suppressed, specialist tradespeople remain in short supply, pointing to a structural mismatch rather than a purely cyclical problem.
Finland’s private services sector improved only marginally in the first quarter of 2026. The current situation is described as clearly below average, and sales growth has been slow. Workforce levels declined slightly, even as sales volumes grew modestly — reflecting efficiency improvements and cautious hiring in an uncertain environment.
Over half of service sector firms — 56 percent — identify insufficient demand as limiting their operations. This is a very high share, consistent with the broader picture of a Finnish consumer sector that is cautious about spending, reflecting both the memory of recent real income losses and the uncertainty generated by the current geopolitical environment.
Labour shortages affect 7 percent of service sector respondents — a significantly lower rate than in construction, consistent with the more skills-diverse labour market in the service sector. Profitability has been declining but the rate of decline has slowed. For the near term, profitability is expected to stabilise, as accelerating selling price increases partially offset the impact of rising costs.
The EK barometer provides a notably clear-eyed assessment of the global scenario analysis. The key variable, in its framing, is the duration and resolution of the Iran War. If the conflict is resolved in a sustainable way within weeks or months — with the Strait of Hormuz reopening for normal shipping — the global economic impact would be relatively contained. The IMF’s favourable scenario, cited in the barometer, shows world economic growth continuing at above 3 percent under these conditions.
If, however, military operations in the Persian Gulf area or uncertainty over Hormuz transit conditions persist into the end of 2026, global economic effects would grow substantially. GDP growth would decline clearly. Inflation would accelerate. Central banks would face strong pressure for rapid rate increases. And Finland, because of its variable-rate exposure, would feel those rate increases with unusual force.
Stock markets fell sharply in March, the EK notes, but have since partially recovered as investors processed the initial shock and assessed probabilities. The uncertainty, as of the survey’s completion, remains high.
Finland’s 2025 GDP growth of 0.2 percent — nearly the weakest recorded in any peacetime year in recent memory — makes the improvement visible in the April barometer more significant than its modest scale might suggest. After a prolonged period of contraction in domestic demand, investment, and construction, the fact that industry is growing, services are at least stable, and construction is showing the first faint signs of bottoming out represents genuine progress.
But that progress is conditional on an external environment that remains deeply uncertain. Finland’s integration into European monetary policy means it cannot set its own interest rates. Its high variable-rate mortgage exposure means it is unusually sensitive to the interest rate decisions that will flow from whatever inflation path the Iran War produces. And its export orientation — to Germany, Sweden, and other European markets — means its industrial recovery depends on those markets continuing to absorb Finnish goods.
The April 2026 barometer closes on a note that captures this condition precisely: the current cyclical improvement in Finnish business conditions has proceeded somewhat better than expected, but global risks are pressing harder than before. The recovery exists. Its durability depends on events that are not within Finland’s control.
Finland’s private services sector improved only marginally in the first quarter of 2026. The current situation is described as clearly below average, and sales growth has been slow. Workforce levels declined slightly, even as sales volumes grew modestly — reflecting efficiency improvements and cautious hiring in an uncertain environment.
Over half of service sector firms — 56 percent — identify insufficient demand as limiting their operations. This is a very high share, consistent with the broader picture of a Finnish consumer sector that is cautious about spending, reflecting both the memory of recent real income losses and the uncertainty generated by the current geopolitical environment.
Labour shortages affect 7 percent of service sector respondents — a significantly lower rate than in construction, consistent with the more skills-diverse labour market in the service sector. Profitability has been declining but the rate of decline has slowed. For the near term, profitability is expected to stabilise, as accelerating selling price increases partially offset the impact of rising costs.
The EK barometer provides a notably clear-eyed assessment of the global scenario analysis. The key variable, in its framing, is the duration and resolution of the Iran War. If the conflict is resolved in a sustainable way within weeks or months — with the Strait of Hormuz reopening for normal shipping — the global economic impact would be relatively contained. The IMF’s favourable scenario, cited in the barometer, shows world economic growth continuing at above 3 percent under these conditions.
If, however, military operations in the Persian Gulf area or uncertainty over Hormuz transit conditions persist into the end of 2026, global economic effects would grow substantially. GDP growth would decline clearly. Inflation would accelerate. Central banks would face strong pressure for rapid rate increases. And Finland, because of its variable-rate exposure, would feel those rate increases with unusual force.
Stock markets fell sharply in March, the EK notes, but have since partially recovered as investors processed the initial shock and assessed probabilities. The uncertainty, as of the survey’s completion, remains high.
Finland’s 2025 GDP growth of 0.2 percent — nearly the weakest recorded in any peacetime year in recent memory — makes the improvement visible in the April barometer more significant than its modest scale might suggest. After a prolonged period of contraction in domestic demand, investment, and construction, the fact that industry is growing, services are at least stable, and construction is showing the first faint signs of bottoming out represents genuine progress.
But that progress is conditional on an external environment that remains deeply uncertain. Finland’s integration into European monetary policy means it cannot set its own interest rates. Its high variable-rate mortgage exposure means it is unusually sensitive to the interest rate decisions that will flow from whatever inflation path the Iran War produces. And its export orientation — to Germany, Sweden, and other European markets — means its industrial recovery depends on those markets continuing to absorb Finnish goods.
The April 2026 barometer closes on a note that captures this condition precisely: the current cyclical improvement in Finnish business conditions has proceeded somewhat better than expected, but global risks are pressing harder than before. The recovery exists. Its durability depends on events that are not within Finland’s control.
