Economy of Finland

By | April 29, 2022

According to cheeroutdoor, Finland entered the 21st century, occupying positions at the beginning of the second ten of the most developed and prosperous countries in the world (GDP – 140 billion euros, 25 thousand euros per capita). GDP growth in 2002 was 1.6% (on average since the end of the 1990s, 1.7%). Skillful use of national resources and the advantages of the international division of labor lie at the basis of high indicators of socio-economic development. In addition, development in the 1990s took place under favorable foreign trade conditions, it was possible to continue the formation of a dynamic diversified economy.

Not so long ago, in Finland, they were annoyed at the narrowness of the base of domestic industry, the forest industry accounted for a significant share of GDP, and the country’s economy fluctuated depending on its conjuncture. Now the share of the timber industry in proportional terms has significantly decreased, along with it, the electrical industry has begun to gain strength, the core of which is the Nokia concern, the world leader in the production of mobile phones. Almost 1/2 of GDP growth in the 1990s. made by Nokia. The main driver of growth was the high demand for cell phones. In 2002, they were sold 30% more than in 2001. New models with a color screen and a camera are especially popular.

The country managed to make a breakthrough in the development of high technologies and informatization of society on the basis of the Finnish identity, R&D and an increase in technical education, especially among students. In terms of the number of mobile phones and Internet connections, the country is among the leading group of advanced powers. The orientation towards foreign markets has intensified, where the country is a major supplier of paper, pulp, engineering products – special ships, machines and equipment for the woodworking and pulp and paper industries. According to the annual examination of the World Economic Forum (WEF), F. in 2002 ranked 2nd in the world in terms of competitiveness.

The small size of the domestic market and the limited national resources determined the choice of the country’s economic development—specialization in the production of a limited range of goods and services for the foreign market. Although the importance of Finland in the world economy is small: 0.5% of total GDP, 0.4% of industrial production and 0.8% of exports, it retains significant positions in the production and export of certain types of industrial products, primarily the traditional forest and paper sector (6th place – for the production and 2nd – for the export of paper and cardboard), as well as telecommunications equipment, cruise ships, etc. The vast majority of industrial products produce approx. 10-15% of industrial enterprises (with the number of employees from 100 people or more), on which St. 50% of all industrial personnel.

Structural adjustment continues, which ensures economic growth and changes the economic face of the country. If in the 1950s the share of agriculture and forestry accounted for more than 25% of GDP, then in the 1990s. only ok. 5%. Now the service sector has become dominant – more than 60% of GDP, while the share of industry has fallen to 30%. 7.1% is employed in agriculture and forestry (2002, in 1974 – 16.2%, in 1950 – 45.8%), in industry – 27.5% (27.5 and 20.8%), in the sphere services – 65.5% (55 and 31.8%).

In the structure of industry (in terms of value added) compared to the beginning. 1950s there have also been significant changes: the share of mechanical engineering increased from 25 to 35%, chemistry – from 7 to 10%, metallurgy – from 3 to 5%, energy – from 4 to 9%. The manufacturing industries produce a wide range of machinery and industrial equipment, especially for the pulp and paper industry (6-7% of production and 10% of world exports). A sector specializing in the production of handling equipment, machines for agriculture and the forestry industry, road and construction works is highlighted. A prominent place is occupied by the electrical industry for the production of power equipment (generators, transformers, electric motors, etc.) and the manufacture of cables.

The timber and paper industry practically remained at the level of 20%, but within it the share of woodworking decreased from 10 to 5%, while the share of the pulp and paper industry increased from 10 to 15%. The structure of production has expanded, including woodworking, pulp and paper industry and wood chemistry. The country, with less than 1% of the world’s forest reserves, is in the forefront in the production and export of timber products. These industrial sectors account for more than 1/4 of the value of GDP and approx. 1/2 of the export value. At the same time, the importance of some domestic industries has declined, in particular the food industry (from 11 to 8%), light industry (from 17 to 2%), and especially mining (from 3 to 1%), although it has significant mineral resources.

The national economy is increasingly oriented towards the production of high-quality specialized products based on the intensive use of innovative developments, relegating to the background the importance of natural resource factors of its international specialization. Outokumpu is a world leader in copper and nickel processing technologies, Kone in the elevator industry, Nokia in the mobile phone and telecommunications sector, Stura_Enso and UPM in the timber industry.

In the 1990s the share of the state sector in industry has decreased to 12-15%, its most significant role is in the mining, metallurgical, chemical industries, oil refining, and mechanical engineering. The state owns 1/3 of the land area and 1/5 of the forests. In general, the state accounts for 21% of goods and services in GDP (2002), but the main levers of its policy are taxes and the budget. The high level of taxation (tax revenues of 46.5% of GDP) testifies to the large redistributive role of the state, like that of its Scandinavian neighbors. The level of public debt is significant (46% of GDP), the inflation rate is 2.6%.

Despite favorable economic indicators, a high standard of living (an increase in the income of individual farms per year by 3.8% in current prices, or 2.1% in constant prices), a high unemployment rate remains (about 10%). Experts attribute the rise in unemployment and the growth in employment to the growth in the number of labor resources. A solidary income policy that provides the same wage increase for all sectors, despite the difference in labor productivity, prevents the reduction of unemployment. Representatives of the business community believe that the employment situation will improve only as a result of labor market reform. However, the leading political forces do not intend to change the current state of affairs.

Certain problems are created by limited energy resources and rising prices for mineral fuels. The problem of their supply can be solved by importing, mainly crude oil and natural gas (since 1974 from the USSR via pipeline) from the Russian Federation. A fundamental decision was made to build the fifth block of the Olkiluoto NPP, which will begin operating within 5 years.

The main feature of Finnish agriculture – the connection with forestry – remains. The main direction – livestock – mainly dairy, gives 70% of the value of its products. 8% of the territory is used – 2.7 million hectares. Despite the processes of ruin of small farms and the concentration of large farms, small farms still dominate in their structure (less than 10 hectares of arable land, 3/4 of the allotment is occupied by forest), they account for 70% of farms, approx. 40% arable land.

Most of the passenger and freight traffic with other countries is carried out by sea (the main seaports are Helsinki, Turku and Kotka). Railway length approx. 7.8 thousand km, they account for 5% of passenger and 1/3 of freight traffic. Road length approx. 77.8 thousand km. An important role is played by inland waterways (6.7 thousand km), a system of canals, incl. Saimaa Canal, part of which passes through the territory of the Russian Federation. Thanks to icebreakers, sea navigation is provided almost all year round.

The inflow of foreign direct investment into Finland accelerated after the lifting of restrictions on foreign ownership in 1993. The country remains a net exporter of capital: the accumulated value of direct investment (DI) abroad is almost 2 times higher than foreign in Finland (31.5 billion dollars and 18.2 billion dollars, respectively). The industry accounts for approx. 70% of FIs of Finnish companies abroad.

The role of foreign trade is great, its annual growth rate is 12.9% (since the end of the 1990s). The share of exports in GDP increased especially from 19.2% in 1990 to 34.3% in 2002, which is associated with accession to the EU. Its markets account for approx. 60% of all external trade. Exports to the EU countries amounted to 54%, to the USA – 9%, to the Russian Federation – 6.6%. If the total volume of exports in 2002 decreased by 2%, then to the Russian Federation it increased by 12%. From the point of view of Finnish business, the Russian Federation is interesting as a market for goods and services, mainly as a supplier of raw materials and energy (approx. 89%). Mutual trade turnover is at the level of 7 billion US dollars. The Finns supply the Russian Federation with products of the pulp and paper industry, foodstuffs, furniture, consumer goods, equipment and vehicles, and carry out construction work.

Economy of Finland