Economic downturn deepens in the third quarter of 2025

Economy enters technical recession: Finland's GDP shrank 0.3% in seasonally adjusted quarter-on-quarter terms in Q3, more than previously estimated and following an upwardly revised 0.2% contraction in the prior quarter. Q3's reading was the weakest since Q3 2023 and the joint-lowest in the euro area.

Shrinking fixed investment pushes GDP into contraction: Relative to the previous quarter's data, figures in Q3 softened for fixed investment (-0.4% in seasonally adjusted quarter-on-quarter terms vs +1.9% in Q2) and imports of goods and services (+2.1% vs +2.8% in Q2). In contrast, readings picked up for private consumption (+0.2% vs -0.7% in Q2), government consumption (-0.2% vs -1.2% in Q2) and exports of goods and services (+2.0% vs +0.1% in Q2). The latter surged thanks to a major cruise-ship delivery in July. On a calendar-adjusted year-on-year basis, economic output shrank 0.6% in Q3, following a 0.1% contraction in the previous quarter.

Economy to accelerate, yet challenges remain: Our Consensus is for quarter-on-quarter GDP growth to return in Q4, a projection supported by strong monthly gains in exports and industrial output in October. However, elevated household savings and unemployment rates plus ongoing fiscal consolidation are likely capping the scale of the rebound. After four years of weakness, GDP growth should accelerate in 2026 as domestic demand strengthens, supported by lower interest rates, a stabilizing housing market and rising defense spending. However, the newly launched EU excessive deficit investigation resulting in a tighter-than-expected fiscal stance is a downside risk.

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Finnish GDP projections for the next ten years from a panel of 20 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Finnish GDP.

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