Research Euroland: Fact Book Finland‏

This fact book gives a brief overview of the main aspects of the Finnish economy and includes many informative charts and tables. In the coming days we will publish fact books on Ireland and Belgium. These fact books can be used as a quick reference point for key ratios etc.

Finland is a well-functioning economy with good institutions, a high educational level and an upbeat growth outlook. Finland is ranked 11th in the world in the World Bank’s Doing Business report, which is the highest within the euro area. According to Transparency International’s Corruption Perception Index Finland has the fourth lowest level of corruption in the public sector in the world. Finland is fulfilling all the Maastricht criteria and is expected to continue to do so. As a result government bond spreads to Germany are low. The current account has changed from a surplus to a deficit but the deficit is far from alarming. There is no external debt.

Finland was hard hit by the financial crisis and the resulting slump in global trade. The future recovery depends to a large degree on the economic development in three main export markets (Sweden, Germany and Russia). Finland’s exports have a high share of electronic goods, which were particularly hard hit by the crisis and Nokia is by far the most important player on the Finnish business scene. Other important sectors are forestry and metal engineering. Finland is a very competitive economy but the large increases in unit labour cost are a challenge.

The government continues to have broad support, although opposition parties gained some votes at the municipal elections. The stance towards euro rescue packages is cautious and Finland is likely to demand collateral in future cases as well, unless the ESM enjoys a senior creditor status. The government aims to narrow the budget deficit by cutting expenditure and raising some taxes; general VAT will be raised from 23% to 24% in 2013. Long-term challenges, especially ageing, do not allow for very expansionary fiscal policy.

Housing prices have risen generally in line with earnings and Finland has the lowest housing loan rates in the eurozone. In Central Helsinki prices clearly exceed the national average, which is largely explained by lack of supply and growing population. Together with weak but stable economic outlook, national housing prices are likely to move sideways in the near future.

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