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Economic Outlook 2/2026

As a result of the war in Iran, the world is facing unprecedented uncertainty. Order intakes in the technology industry did not see growth in the first months of the year. However, considering the prevailing global uncertainty and the strong performance in the comparison quarter, the intakes can be deemed tolerable. Going forward, the outlook depends largely on the duration of the war in Iran and, above all, on the trends in both inflation and interest rates.

Published 12.5.2026

Global and Finnish Economic Outlook

No growth in order intakes in the technology industry in early 2026 – outlook depends on the duration and consequences of the war in Iran

Towards the end of 2025, there were indications in the technology industry that the economic situation was improving, and expectations of a pickup in demand in 2026 were on the rise. However, the global situation threatens once again to thwart budding growth. The war of aggression that the United States launched against Iran at the end of February has led to an extraordinary energy crisis, and uncertainty is riding at an all-time high.

Due to the Iran war, the outlook for the global economy has darkened in the first months of the year. In its April forecast, the International Monetary Fund (IMF) expects global growth to amount to 3.1 per cent this year. In early 2026, the IMF was prepared to raise its growth forecasts for the year, but the war in Iran has dampened growth expectations, and the forecast has thus been adjusted downward by 0.2 percentage points from January. The IMF estimates that global inflation in 2026 will be 4.4 per cent, up from its January forecast of 3.8 per cent.

This so-called reference forecast by the IMF is based on the assumption that the war in Iran will be resolved in the second half of the year and that oil prices will return to lower levels towards the year-end. If the war drags on, there is a significant risk that economic development will fall short of current expectations. In the unfavourable scenario, global economic growth will slacken to 2.5 per cent this year while inflation will top 5 per cent. The IMF is already warning of a bleak scenario in which growth in the global economy will amount to only about two per cent if the disruptions in the energy markets continue into 2027. In practice, this means a recession.

Everything thus now hinges on the duration and scope of the war in Iran, and on how quickly energy production and logistics return to normal after the war ends. Even if the war were to end immediately, it will take time to repair the infrastructure and restore oil and gas production to their usual levels. According to the IMF, the current situation lies somewhere between the reference forecast and the unfavourable scenario, and it deteriorates with every week that the war continues.

Inventory buildup stimulates industry in both the eurozone and the United States, but optimism about 2026 has waned

The consequences of the war in Iran are now being felt in the eurozone economy. The Purchasing Managers’ Index (PMI), which is a reliable indicator of economic trends in all business sectors, fell into the red in the eurozone in March after 15 months of recovery. The situation is currently exacerbated especially by the steep slump in the service sector.

On the other hand, industry saw growth in March and April. Inventory buildup is a major factor driving this growth: companies are now preparing for price increases and supply chain disruptions by stocking up on goods. As a result, the upturn in the eurozone industrial sector may prove to be short-lived.

In early 2026, for the first time in a long while, there was confidence about the year ahead, particularly in eurozone industry, and expectations were riding higher than they had for many years. Expectations among companies weakened during March and April. In Germany, a major export market for Finland, expectations have already become pessimistic, but the rest of the eurozone still expects to see growth, albeit weaker than anticipated in early 2026.

In the United States, the PMI for all sectors points to cautious growth in April after an almost stagnant March. Economic growth remains muted, however, and demand has clearly weakened, particularly in the service sector. Industrial output has increased, but this growth is largely due to inventory buildup in the United States as well.

In both the eurozone and the United States, cost pressures have mounted due to the war in Iran. In addition to higher energy prices, this is driven by the rising prices of other goods and services. The war in the Middle East has disrupted supply chains and led to longer delivery times.

The economic situation improves in the manufacturing industry during the first months of the year

According to the Business Tendency Survey of the Confederation of Finnish Industries, the situation in the manufacturing industry improved during the first months of the year, but remains below the long-term average. According to the survey, industrial output is increasing, and slightly fewer respondents now see insufficient demand as an obstacle to growth.

However, the economic outlook has once again become more muted on the heels of the uncertainty caused by the war in Iran.

The TeknoBaro survey in March had a similar message. Demand in the technology industry picked up gradually towards the end of 2025, and this trend appears to have continued in the first months of 2026.

Companies are still calmly monitoring the situation, but the risks are rising with time

The general mood at technology companies is still fairly calm at the moment. The global situation has not caused any panic among them. The war in Iran has not as yet had any direct widespread impacts on the sector. This is also indicated by the rise in the balance figure for tender requests since January, which means that there is interest in the market in spite of all the massive uncertainty.

The risks lie in the longer term. If the war in Iran drags on, inflation could exceed the ECB’s medium-term target of 2 per cent. That said, inflation is currently tightening its grip due to an exceptional supply shock: oil production and consequently its availability have fallen due to the war in Iran, while energy prices have risen. In principle, interest rate hikes would be the remedy for rising inflation. The problem is that raising interest rates would not fix the root cause of inflation, that is, the availability of oil. Economic growth is already sluggish, and there is a risk that it will stall entirely. If the war in Iran drags on, central banks will be facing a dire situation.

The Finnish technology industry is an export sector that produces investment goods. That is, it manufactures machinery and equipment for a wide variety of sectors, such as mining, forestry, energy and construction. The price of money has a significant impact on the investment decisions of customer companies. Higher interest rates, or even just worries that they will rise, could lead them to postpone their investment decisions. From the perspective of industry, an interest rate hike by central banks would be a harmful measure that would most likely weaken demand in the current circumstances.

Tolerable order intakes

The fourth quarter of 2025 was exceptionally strong for the technology industry. By comparison, new orders in the technology industry fell by almost one-fourth during the January–March period. This was to be expected, as the figures for the previous quarter included very significant orders in the marine industry. In the first months of the year, new order intake increased by 11 per cent year-on-year. Order books weakened slightly compared with the end of the year, but grew by nearly a fifth year-on-year.

Order intakes can be described as moderate. No significant growth was seen in the first months of the year, but considering the prevailing global uncertainty and the strong performance in the comparison quarter, the overall situation can be deemed tolerable even though the figures are somewhat muted.

The marine industry received exceptionally high-value orders in the fourth quarter of last year. Although new orders in the marine industry were at a lower level quarter-on-quarter, the volume remained substantial.

The situation in mechanical engineering, the largest main sector of the technology industry, raises questions: if major orders from the marine industry are excluded when examining the intake of new orders, the total intake saw a slight year-on-year decline. This is particularly significant when assessing the economic situation. This decline might be due to seasonal variations, but it does cause slight worries about whether uncertainty in the global economy is currently burdening demand. 

The balance figure for tender requests, which indicates overall demand, rose during the first months of the year and stood at 14 in April. The balance figure has not been this high since January 2022. Based on this, it would seem that demand continued to pick up during the first months of the year. Starting last year, companies have been reporting that requests for tenders are coming in, but customers are taking a long time to deliberate on their final purchase decisions and are also postponing decisions. Due to the general mood of uncertainty, no one dares to place orders, even if they would need to. Consequently, an increase in the balance figure for tender requests does not necessarily translate directly into a rise in new orders.

The number of employees levelled off during the first months of the year. In the technology industry as a whole, employment figures are no longer declining, but not growing significantly either. When examining the situation by industry, several interesting trends emerge. In the first quarter of the year, the number of employees continued to decrease in service sectors, namely consulting engineering and information technology. These sectors are still struggling due to the weak economic climate. On the other hand, in the manufacturing industry, the number of employees in mechanical engineering, the largest of the main sectors of the technology industry, seems to have swung to slight growth. Order books in the sector have strengthened, driven in part by shipyards and the defence industry. This is gradually starting to show in the employment figures as well. 

The number of new hires has recovered from its lowest ebb, which also reflects the stronger order books. The number of new hires in the whole technology industry was over 8,200 in the first months of the year. However, considered from a long-term perspective, the number of hires remains low. 

Despite the global crises, the overall mood in the business community has been cautiously upbeat during the first months of the year. Business surveys indicate that the situation is now better than it was. The further strengthening of the PMI for eurozone industry – the most significant export market for the technology industry – in March and April could boost demand in these months. We are living through extremely turbulent times in the global economy. If the war in Iran and the energy crisis drag on, the risks of a downturn are extremely high.

Technology industries in Finland

Order intakes weaken, but the comparison quarter is exceptionally strong

According to preliminary estimates, the turnover of technology industry companies in Finland rose by approximately 2.7 per cent in 2025 from 2024. Turnover fell in mechanical engineering and the metals industry. Turnover was growing in the electronics and electrotechnical industry, information technology and consulting engineering. Turnover in Finland amounted to approximately EUR 103 billion in 2025.

The monetary value of new orders in the January-March period was 23 per cent lower than in the previous quarter, but 11 per cent higher year-on-year.

At the end of March, the value of order books was 2 per cent lower than at the end of December, but 18 per cent higher than in March 2025.

On the basis of order trends at the turn of the year, the turnover of technology industry companies is expected to grow during the present year.

The balance figure for tender requests, which indicates overall demand, rose during the first months of the year and stood at 14 in April. The balance figure has not been this high since January 2022. The positive balance figure indicates that there is market activity in spite of the uncertainty.

The number of personnel employed by technology industry companies in Finland at the end of March was on a par with the end of December, around 329,000.

According to the personnel survey by Technology Industries of Finland, the number of employees affected by temporary lay-off procedures at the end of March was approximately 10,800. The number of temporary lay-offs remained unchanged compared to the situation at the end of the year.

New hires picked up in January–March compared with the end of last year. Recruitments totalled 8,200. Some companies were increasing their payroll, while others were hiring new employees due to retirements and employee turnover.

Information based on the situation on 6th May 2026.
Next Economic Outlook will be published 5th August 2026 at 10.00 am.

Contacts:

Economy and Sustainable Growth

Mikkonen Hanne

Senior Economist – Economic Development and Investment Technology Industries of Finland

+358 440296152 hanne.mikkonen@teknologiateollisuus.fi