Finland: Economy

Finland has a highly industrialized, free-market economy with a per capita output equal to that of other western economies such as France, Germany, Sweden, or the U.K. The largest sector of the economy is services (57.1%), followed by manufacturing and refining (40.3%). Primary production is at 2.6%.

The Finnish economy had made enormous strides since the severe recession of the early 1990s. Finland successfully joined the euro zone and outperformed euro-area partners in terms of economic growth and public finance. Following a period of sustained and robust growth, the Finnish economy suddenly slowed in the wake of the international financial crisis. GDP growth shrank from 0.9% in 2008 to -8.2% in 2009 (the sharpest contraction since Finland gained independence from Russia in 1917). Exports declined 32%, and unemployment climbed to 8.2%.

In 2010 the Finnish economy recovered from the 2009 financial crisis better than most forecasts predicted, and showed a broad-based growth of 3.1%. The European financial crisis negatively affected Finnish exports and contributed to lower than expected growth of 2.9% in 2011. In 2012 Finland should avoid recession, but growth is expected to be minimal, predicted at 0.4%. The unemployment rate for 2011 was 7.8%. Inflation rose to 3.6% in 2011.

The general government financial balance turned to deficit in 2009, bringing an end to a sustained period of surpluses. Nonetheless the deficit did not exceed the 3% threshold under the EU Stability and Growth Pact. Despite significant budget cuts and increased taxes, the current budget predicts a deficit of -1.4% in 2012.

Exports of goods and services contribute over 38% of Finland's GDP. Metals and engineering (including electronics) and timber (including pulp and paper) are Finland's main industries. The United States is Finland's third most important trading partner outside of Europe. With a 3.7% share of imports in 2011, the United States was Finland's sixth-largest supplier. Major exports from the United States to Finland continue to be machinery, telecommunications equipment and parts, metalliferous ores, road vehicles and transport equipment, computers, peripherals and software, electronic components, chemicals, medical equipment, and some agricultural products. The primary competition for American companies comes from Russia, Germany, Sweden, and China. The main export items from Finland to the United States are electronics, machinery, ships and boats, paper and paperboard, refined petroleum products, telecommunications equipment and parts. In 2011, the United States was Finland's largest customer after the EU (55.0%), and Russia (9.4%). However, trade is only part of the totality: American companies in Finland employed 23,800 Finns, and Finnish companies in America employed 31,500 Americans in 2008. About 2.0% of the Finnish GDP comes from exports to the United States.

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 farmers own sizable timber stands that 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.

Sources:

CIA World Factbook (April 2012)
U.S. Dept. of State Country Background Notes ( April 2012)

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