Finland’s capital Helsinki with Uspenksi Cathedral, will struggle in 2026. (Image: Getty)
It ranks as having one of the highest qualities of living in Europe often leads in happiness and life satisfaction studies but that might change for one particular wealthy European country in 2026. This particular country was named the world’s happiest country for the eighth consecutive year in 2025 but is set to have the weakest performing economy in Europe throughout 2026 along with two other countries popular with British holidaymakers.
Globally recognised for its exceptioanl education system and pristine natural beauty, it is known as the “land of a thousand lakes” (actually over 188,000) and boasts vast, untouched forests as well as an advanced tech economy. However while this country and two others are set to experience economic woes in 2026, the the big three economies of Europe, the UK, France and Germany look set to undergo modest growth this year with the UK performing the best.
Finland is a winter wonderland with 300,000 Britis visiting each year. (Image: Getty)
Finland, Italy, and Austria are projected to be among the weakest-performing economies in Europe in 2026, with growth rates significantly below the eurozone average. Forecasts suggest 2026 real GDP growth of roughly 0.7%–0.9% for Italy and Austria while Finland faces a potential stagnation with growth rates potentially near 0.1%–0.8%. These nations are struggling with weak domestic demand, high manufacturing costs, and structural weaknesses.
Finland is struggling with high debt and a slow exit from a prolonged recession. The recession has severely impacted the housing construction sector and weakened consumer confidence.
High labour costs and a deeply negative public deficit, with the debt-to-GDP ratio projected to exceed 90% by 2026.
According to the Bank of Finland Bulletin: “Consumer confidence will not improve but will instead remain low due to the uncertain times. Confidence is undermined on a longer term basis by the threat of unemployment, the extremely weak state of the public finances and Russia’s war in Ukraine.
“In addition to this, residential property values, which form the basis of household wealth, have been declining in recent years. Households tend to be risk-averse and consequently prefer to build up their savings and reduce their debt. Uncertainty about the global economy will also remain elevated, and the implementation of tariffs will slow Finnish export growth more than anticipated. Finland’s economy will be almost 2% smaller in 2028 than under the baseline scenario.”
Finland’s population enjoy a healthy outdoor lifestyle…at least in the summer months! (Image: Getty)
Key factors in Italy‘s stagnation include high public debt and ongoing fiscal consolidation (budget deficit reduction) limited government investment, although the EU-funded Recovery and Resilience Plan (NRRP) funds provides a temporary boost until the mid-2026 deadline.
Italy is also stuggling with high energy costs, low productivity growth, and a shrinking, aging workforce. Growth is expected to be driven primarily by domestic consumption and investment, rather than net exports.
Meanwhile Austria is struggling with post-Recession weakness with a 2026 GDP forecast of pproximately 0.9%–1.1%, marking a slow recovery from three years of stagnation and recession.
High energy costs and rapidly rising unit labour costs have damaged industrial competitiveness, particularly in the export-oriented manufacturing sector. A cooling labour market and high household savings rates (lack of consumption) are dampening domestic demand. The economy is considered “anaemic,” relying on a modest recovery in Germany to lift its own exports.
But it is not all bad news across Europe in 2026. Ireland stands as an outlier in the The Organisation for Economic Co-operation and Development (OECD) ranking, which predicts a 2.1% growth in 2026 while the KPMG forecasting for Ireland sits at 3%. Proving even stronger are Turkey at 3.6% and Poland at 3.3%.
Meanwhile the UK is projected to be the fastest-growing major European economy among the Gy7 with GDP growth between 0.9% and 1.3%. Germany and France are expected to experience more modest growth, with estimates largely falling around or below 1% to 1.1%