Finland Economy Facts
In addition to the forest, Finland has few natural resources. Despite this, the country has achieved a high standard of living. In addition to the forest industry, the most important industries also include the production of electronics as well as metal and workshop products. In recent years, the service sector has become increasingly important and now employs close to three-quarters of the labor force.
The Finnish market is relatively small and the country is dependent on extensive trade, especially in Sweden, Germany, the US and China. Traditionally, Russia is also an important trading partner, but since 2014 EU sanctions against Russia and Russian import bans on certain goods from EU countries have led to a sharp reduction in trade between Finland and Russia (see also Foreign Trade).
- Countryaah.com: Major imports by Finland, covering a full list of top products imported by the country and trade value for each product category.
In recent decades, Finland has been a typical mixed economy. Most companies are privately owned, but some businesses have a largely monopoly on the state, such as rail traffic and alcohol sales. The state is also part owner of some large companies such as Finnair and the industrial group Metso. In recent years, the economy has been partially liberalized, including mail and telecommunications now being managed by private companies. In order to increase profitability, many Finnish companies have chosen to move production of goods to low-wage countries.
The deep international recession in the early 1990s hit Finland hard. In three years, unemployment rose from just over 3 percent to 18 percent. From 1991 to 1992, gross domestic product (GDP) fell by 6 percent. One reason why Finland was hit so hard was that exports to the east declined sharply in connection with the dissolution of the Soviet Union in 1991. A large number of companies were closed down and many households found it difficult to manage.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including FIN which represents the country of Finland. Check findjobdescriptions to learn more about Finland.
Finland joins the euro
At the end of 1993, the Finnish economy began to recover. New export markets emerged and the previously so strong dependence on the forest industry declined to some extent. Particularly important were the electronics and IT sectors. Low inflation and falling interest rates led to an increase in consumption as Finns got more money to move. As a result of Finland’s entry into the EU in 1995, food prices in the country fell.
In order to stabilize its currency, Finland joined the EU’s currency cooperation EMU in 1998. In January 2002, the Finnish soil was replaced by the euro. In 1994–2008, the country’s economy grew by an average of 3-4 percent per year, which was above the euro area average.
One weakness of the Finnish economy was that such a large part of the growth was long based on the success of a single company: the telecommunications company Nokia, which in the early 2000s accounted for up to 4 percent of the country’s GDP and over 20 percent of total exports.
From the autumn of 2008, several western countries, not least in the euro zone, were drawn into a global financial crisis that caused the economic downturn and which also exposed major economic problems in several of the euro area countries. In 2009, Finland’s GDP fell by over 8 percent, mainly due to a decline in exports. In 2010, a certain recovery began and the economy grew somewhat. One reason for this was that the Finnish major banks performed relatively well because they had been more cautious about lending money than many other European banks.
The growth was also due to the fact that exports regained momentum from 2010. But there were major differences between different industries. The chemical industry did well during the crisis, while shipbuilding and heavy vehicle manufacturers, for example, lost many customers. Unemployment remained relatively high.
At the end of the first decade of the 21st century, it became clear that Nokia had difficulty asserting itself in competition with other telecom companies. In 2012, the company was forced to lay off thousands of employees in both Finland and other countries, while parts of production would be relocated to Asia. From 2008 to early 2012, the company’s share lost 90 percent of its value.
The recession also hit the state finances. In 2009, the budget deficit rose, approaching the 3 percent of GDP set by the euro area countries. The government announced several savings programs, including cuts in health care and school, higher VAT and tax increases on electricity, newspapers and tobacco.
Finland’s national debt increased from just over one third of GDP in 2007 to about half of GDP in 2011, which was nevertheless a low figure in international comparison. Households’ debt grew throughout the decade.
Competition in the telecommunications market became increasingly fierce, and Nokia’s losses increased. In September 2013, the company announced that it had decided to sell its mobile phone unit to US Microsoft. It was a psychological blow to the view of the Finnish economy, but in numbers, Nokia no longer contributed to GDP but was instead a brake on growth.
From 2014, Finland’s economy was also adversely affected by the EU’s rapidly deteriorating relations with Russia, a consequence of the Ukraine crisis. Finland’s commodity exports to neighboring countries in the east declined sharply as the EU imposed trade sanctions on the Russians, which in turn banned imports of certain goods from the EU. Other causes of the economic downturn in Finland were increased costs for the public sector as the population on average has grown older.
Relatively large wage increases in 2008–2009 have contributed to the international competitiveness of Finnish companies. Wage increases have also resulted in inflation since 2008 averaging higher than the average in the euro zone.
As a consequence of the country’s economy having shrunk three years in a row (2012–2014), in the autumn of 2015, the government introduced a series of restrictions in the working conditions of public employees. The number of holiday days decreased from 38 to 30. The overtime allowance was halved and the compensation for work on Sundays was reduced from 100 to 75 percent. A sick leave on sick leave was also introduced. The government’s goal was to reduce the state’s labor costs in the public sector by 5 percent.
In 2015, GDP growth fell to a modest 0.4 percent, while Finnish government debt climbed to 63 percent of GDP from 59 percent in 2014. Thus, for the first time, the government debt exceeded the eurozone’s ceiling of 60 percent of GDP.
FACTS – FINANCE
GDP per person
US $ 49,648 (2018)
US $ 273,961 M (2018)
1.7 percent (2018)
Agriculture’s share of GDP
2.5 percent (2018)
Manufacturing industry’s share of GDP
15.3 percent (2018)
The service sector’s share of GDP
59.2 percent (2018)
1.2 percent (2019)
Government debt’s share of GDP
59.3 percent (2018)
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