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Economy of Finland

From Academic Kids

Finland has a highly industrialized, largely free-market economy, based on abundant forest resources, capital investments, and technology. Traditionally, Finland has been a net importer of capital to finance industrial growth. In the 1980s, Finland's economic growth rate was one of the highest of industrialized countries, with per capita output roughly that of the United Kingdom, France, Germany, Sweden and Italy.

Finland's key economic sector is manufacturing - principally the wood, metals, engineering, telecommunications and electronics industries. The telecommunications and electronics industries are now the biggest export sector. Trade is important, with exports equaling more than one-third of GDP. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population, although the importance has declined in the recent years.

In 1991, Finland fell into a deep recession caused by economic overheating, depressed foreign markets and the dismantling of the barter system between Finland and the former Soviet Union. More than 20% of Finnish trade was with the Soviet Union before 1991, and in the following two years the trade practically ceased. 1991 and again in 1992, Finland devalued the markka to promote export competitiveness. This helped stabilize the economy; the recession bottomed out in 1993, with continued growth through 1995. Since then the growth rate has been one of the highest of OECD countries. Unemployment continues to be a problem for Finland, and in late 1996 it was around 19%, but because of active employment policies has been reduced formally to a level of 11 % in 2002. According to Finland's bank's statistics, the total rate of unemployment including hidden unemployment accounted to 18% in the fall of 2003.

Exports of goods contribute more than 20% of Finland's GDP; combined exports of goods and services amount to at least 25% of GDP. Exports and imports of goods equal about 40% of GDP. Timber and metalworking are Finland's main industries, but other industries produce manufactured goods ranging from electronics to motor vehicles. Finnish-designed consumer products such as textiles, porcelain, and glassware are world-famous.

Except for timber and several minerals, Finland depends on imported raw materials, energy, and some components for its manufactured products. Farms tend to be small, but sizeble timber stands are harvested for supplementary income in winter. The country's main agricultural products are dairy, meat, and grains. Finland's EU accession has accelerated the process of restructuring and downsizing of this sector, with the farming population decreasing.

An extensive social welfare system, constituting about one-fifth of the national income, includes a variety of pension and assistance programs and a comprehensive health insurance program. Although free education through the university level also is available, only about one child in four receives a higher education in the highly competitive system. In the mid-1970s, the educational system was reformed with the goal of equalizing educational opportunities. Beginning at age seven, all Finnish children are required to attend a comprehensive school (peruskoulu) of nine grade levels (six primary and three secondary). After this, they may elect to continue along an academic (lukio) or vocational (ammattikoulu) line. About 60% select the academic line. The number of openings in higher educational institutions is less than the demand. The education is based in Finnish or Swedish language. It is also now possible to study in English from primary up to University.

Finland generally welcomes foreign investment. Areas of particular interest for investors are specialized high-tech companies and investments. The good infrastructure in Finland has enhanced Finland's position as a gateway to Russia.

Finland is experiencing rapidly increasing integration with Western Europe: Finland was one of the 11 countries joining (Greece joined later) the Economic and Monetary Union (EMU) on 1 January 1999. The national currency markka (FIM) in circulation was withdrawn and replaced by euro (EUR) in the beginning of 2002.

GDP: EUR 135.976 billion in 2001. Purchasing power parity - $108.6 billion (1999 est.)

GDP - real growth rate: 3.5% (1999 est.)

GDP - per capita: EUR 26,210 per capita in 2001. Purchasing power parity - $21,000 (1999 est.)

GDP - composition by sector:
agriculture: 5%
industry: 32%
services: 63% (1997)

Population below poverty line: 0%

Household income or consumption by percentage share:
lowest 10%: 4.2%
highest 10%: 21.6% (1991)

Inflation rate (consumer prices): 1% (1999 est.)

Labor force: 2.533 million

Labor force - by occupation: public services 32%, industry 22%, commerce 14%, finance, insurance, and business services 10%, agriculture and forestry 8%, transport and communications 8%, construction 6%

Unemployment rate: 10% (1999 est.)

Budget:
revenues: $41 billion
expenditures: $41 billion, including capital expenditures of $NA (1997 est.)

Industries: metal products, shipbuilding, pulp and paper, copper refining, foodstuffs, chemicals, textiles, clothing

Industrial production growth rate: 4.8% (1999)

Electricity - production: 75,299 GWh (1998)

Electricity - production by source:
fossil fuel: 52.5%
hydro: 2.3%
nuclear: 16.3%
other: 26.2% (2003)

Electricity - consumption: 79,278 GWh (1998)

Electricity - exports: 300 GWh (1998)

Electricity - imports: 9,550 GWh (1998)

Agriculture - products: cereals, sugar beets, potatoes; dairy cattle; fish

Exports: €46 378 million (2003)

Exports - commodities: machinery and equipment, chemicals, metals; timber, paper, and pulp

Exports - partners: (EU 53.0%) Germany 11.8%, Sweden 9.9%, UK 8.1%, USA 8.1%, Russia 7.5%, France 3.7%, China 2.2% (2003)

Imports: €36 775 Million (2003)

Imports - commodities: foodstuffs, petroleum and petroleum products, chemicals, transport equipment, iron and steel, machinery, textile yarn and fabrics, fodder grains

Imports - partners: (EU 55.0%) Germany 15.0%, Russia 11.9%, Sweden 11.1%, UK 5.3%, France 4.8%, USA 4.7%, China 4.3% (2003)

Debt - external: $30 billion (December 1993)

Economic aid - donor: ODA, $379 million (1997)

Currency: 1 euro (EUR) = 100 cent

Exchange rates: euros per US$1 - 1.0073 (September 2002), 0.9867 (January 2000), 0.9386 (1999); markkaa (FMk) per US$1 - 5.3441 (1998), 5.1914 (1997), 4.5936 (1996), 4.3667 (1995)
note: The euro (EUR) has replaced the local currency markka (FIM) on 1 January 2002. The rate was EUR 1 = FIM 5.94573.

Fiscal year: calendar year

See Also


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