Finland - Economic development

Over a decade after the end of the Cold War, Finland has entered a new phase in its economic development. After a three-year recession in which Finnish reeled from the collapse of the Soviet market, Finland rebounded by shifting its economic sights westward. The successful development of high tech industries has placed Finland in the forefront of the communications boom. This factor, combined with European Union (EU) membership, has radically altered Finland's economic significance.

The unemployment rate in 2001 remained above the EU average, and gross domestic product (GDP) growth stalled, due in part to the world economic downturn and reduced exports. Finland's educational system is one of the best among Organization for Economic Cooperation and Development countries, and its highly developed welfare state allowed the country to convert easily to the euro. Early retirement has depressed the labor supply, however, and the population is aging rapidly. This could lower potential economic growth in the future. Finland's 2003 budget planned tax cuts of 0.5% of GDP and increased expenditures by 4%, transforming a budget surplus into a deficit of 0.2% of GDP. Pension reform was enacted in 2002.