Finland - Economy





At the end of World War II, Finland's economy was in desperate straits. About 10% of the country's productive capacity had been lost to the former USSR, and over 400,000 evacuees had to be absorbed. Between 1944 and 1952, Finland was burdened with reparation payments to the USSR, rising inflation, and a large population growth. However, the GDP reached the prewar level by 1947, and since then the economy has shown consistent growth.

Handicapped by relatively poor soil, a severe northern climate, and lack of coal, oil, and most other mineral resources necessary for the development of heavy industry, the Finns have nonetheless been able to build a productive and diversified economy. This was made possible by unrivaled supplies of forests (Finland's "green gold") and waterpower resources ("white gold"), as well as by the Finnish disposition toward hard work, frugality, and ingenuity. Agriculture, long the traditional calling of the large majority of Finns, has been undergoing continuous improvement, with growing specialization in dairying and cattle breeding. The industries engaged in producing timber, wood products, paper, and pulp are highly developed, and these commodities continue to make up a significant proportion of the country's exports. After World War II, and partly in response to the demands of reparations payments, a metals industry was developed, its most important sectors being foundries and machine shops, shipyards, and engineering works. The 1990s saw Finland develop one of the world's leading high tech economies. Dependent on foreign sources for a considerable portion of its raw materials, fuels, and machinery, and on exports as a source of revenue, the Finnish economy is very sensitive to changes at the international level.

The annual growth of GDP averaged 4.3% between 1986 and 1989, after which it was hard hit by the collapse of the former USSR, formerly Finland's chief trading partner. For 40 years, Finland and the USSR had conducted trade on a barter basis, a practice that ended in 1991. GDP was flat in 1990, fell by 7.1% in 1991, a further 4% in 1992, and 3.6% in 1993.

The regional economic recovery in Europe during 1994 helped Finland's economy to turn around. By early 1995, the economy began to show signs of strong growth—GDP had grown 4.5% by the end of that year, and by 2000, it had reached 6.1%. In October 1996 Finland agreed to join the European currency grid, which limits currency fluctuations to 15% up or down, and proclaimed its determination to join European economic and monetary union (EMU), which it joined in 1999. Thus far, it is the only Nordic EU member to join, as Denmark and Sweden decided to opt out of the EMU.

The success of the Finnish economy in the late 1990s was largely due to the country's success in the high tech sector. Finland had the highest per capita Internet connections and mobile phone ownership; in 2002, 75% of Finns owned a mobile phone. Chief among Finnish companies is Nokia, the world's leading producer of mobile phones.

In the early 2000s, the global economy was in a downturn, and Finland's economy was duly affected. Demand for Finnish exports declined, and industrial production shrank for the first time in 10 years. In 2001, Finland's GDP growth was among the lowest of the euro zone, at 0.7%, and unemployment remained above the euro zone average (9%). However, the service sector (accounting for over 60% of GDP) remained strong. In 2002, the government was running a budget surplus of around 3%.

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