The Economy of Finland

Matti Paavonen, Economist at The Federation of Finnish Technology IndustriesPresentation for the American Fulbright GranteesSeptember 2nd 2011, Finnish Ministry of Foreign Affairs

2

Introduction to the Economy of Finland

• Economic history• Economic development• International comparisons• Production structure• Finnish technology industries

3

Wealth and Health by Gapminder.org

• Gapminder is a non-profit venture – a modern “museum” on the Internet – promoting sustainable global development and achievement of the United Nations Millennium Development Goals.– Hans Roling, Professor of International Health at Karolinska Institutet– “Unveiling the beauty of statistics for a fact based world view”

www.gapminder.org

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Production volume development in Finland

-20 %

-15 %

-10 %

-5 %

0 %

5 %

10 %

15 %

20 %

25 %

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Real GDP growth Average (1901-2010)

1581 – 1808Grand Principality of Finland (Sweden)

1809 – 1917Autonomous Grand Duchy of Finland (Russia)

1917 –Republic of Finland

1918Finnish Civil war

1929 ~ 1939The Great Depression

1939 – 1945World War II

1952Last war reparations paid to the USSR(Total reparations were 4,8 Bill. in 2009 Euros)

1973First Oil crisis

1973Second Oil crisis

1990’sDepression

Strong industrial growth

Urbanization

1995Finland joins the EU

1989 – 1991Fall of the USSR

2002Finland adopted the euro (Fixed since 1999)

IT bubble

2008 –Global financial crisis

Source: Statistics Finland, Various historical sources

1899 – 1917Russification Emigration

5

GDP and GDP per Capita in 2010

Source: IMF / World Economic Outlook April 2011

GDP, Billion USD in current prices

1 United States 14,657.8

2 China 6,103.33 Japan 5,458.9

… … …

33 Colombia 285.5

34 Finland* 239.235 Malaysia 238.0

… … …

180 São Tomé and Pr. 0.20

181 Kiribati 0.15

182 Tuvalu 0.03

GDP (PPP) per capita, USD1 Qatar 88,559

2 Luxembourg 81,383

3 Singapore 56,522

… … …

5 UAE 48,821

6 United States 47,2847 Switzerland 41,663

… … …

21 United Kingdom 34,920

22 Finland* 34,58523 France 34,077

… … …

180 Burundi 411

181 Liberia 392

182 Congo, Dem. Rep. 328

Finland0,4 %

Rest of the

World76,3 %

United States23,3 %

Share of the world GDP

*) Before crisis (2008) level was 271.8 Billion USD and 36,205 USD (PPP) per capita.

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International Rankings

Source: Various

Economy Year Finland USA Out of #The World Competitiveness Scoreboard 2011 15 1 59Index of Economic Freedom 2011 17 9 179Global Competitiveness Report 2010-11 7 4 139The Global Enabling Trade Report 2010 12 19 125Globalization Index 2010 9 27 181Economist e-readiness rankings 2009 10 5 70

Standard of Life Year Finland USA Out of #Life expectancy at birth (CIA) 2011 26 34 191Global Peace Index 2011 7 82 153Human Development Index (inequality-adjusted HDI) 2010 12 (11) 4 (12) 169 (139)Worldwide Press Freedom Index 2010 1 20 178World Audit - Democracy Rank 2010 1 15 150World Audit - Press Freedom Rank 2010 1 14 150World Audit - Corruption Rank 2010 4 17 150Environmental Performance Index 2010 12 61 163Corruption Perceptions Index 2010 4 22 178Mother's Index Rank 2010 7 28 166Women's Index Rank 2010 6 23 166Children's Index Rank 2010 18 34 166Economist Index of Democracy 2010 7 17 167The Global Gender Gap Report 2010 3 19 134UN Gini - Income equality 2009 7 77 142Programme for International Student Assessment (PISA) 2009 3/6/2 16/35/23 57Happy Planet Index 2009 59 114 143

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Production volume development 1900 – 2011f

0200400600800

1000120014001600180020002200240026002800300032003400360038004000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Finnish Real GDP (1900=100)U.S. Real GDP (1900=100)

Source: Statistics Finland, BEA, IMF, Historical sources

1939 – 1945World War II

1990’sDepression

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Unemployment rate in 1956 – 2010

0

2

4

6

8

10

12

14

16

1819

5619

5819

6019

6219

6419

6619

6819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

10

Finland United States

Source: OECD

1990’sDepression

2008Global Financial Crisis

2000’sIT Bubble

9

60

70

80

90

100

110

120

130

140

150

160

170

1975 1980 1985 1990 1995 2000 2005 2010

1990=100

Germany Italy FINLAND Sweden USA Japan

Productivity is measured as real value added produced per hours worked*) Last figures are forecasts for production per employee**) The figures for Japan represent production per employee

Productivity Growth by Country

Source: Eurostat

The U.S.

Finland

10

0,0 %

0,5 %

1,0 %

1,5 %

2,0 %

2,5 %

3,0 %

3,5 %

4,0 %

4,5 %

5,0 %Is

rael

Finl

and

Swed

en

Sout

h K

orea

*

Japa

n

Ger

man

y

USA

*

Fran

ce

EU27 UK

Chi

na

GDP share, %

GDP share of R&D investment by country in 2009

Source: Eurostat, OECD

*) Figures for countries marked with an * are for 2008.

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Production structure in Finland and the U.S.

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

Manufacturing and refining Services Primary production

Source: Statistics Finland, OECD

Secondary production* in the U.S.

Services in the U.S.

*) Secondary production = Manufacturing, Power etc. supply and Construction The gap between the U.S. lines shows the GDP share of services in the U.S.

GDP share, % GDP share, %

12

0102030405060708090

100110120130140150

98 99 2000 01 02 03 04 05 06 07 08 09 2010 11e 12e

Greece

Italy

Ireland

Belgium

Portugal

UK

Spain

Sweden

Finland

USA

The Public Debt in Europe is Growing at Record Speed

Source: OECD

Public debt / GDP, %

13

2 411

28 31 27 28 26 25 28 25 23 24 22 1618

24

20 20 1920 21 23 24 24

21

8

7 7 7 7 8 1111 12 13 11

913

6956 45

3929 27 26 27 25 24 20 20 19 17

1920

1626

18 17 17 19 18 21 21 21 22 22 24 26 30

19

1715

18 21

76

19

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %19

60

1970

1980

1990

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Chemical industries'and other products

Wood, pulp and paper

Steel and non-ferrousmetals

Machines, metalgoods and transportequipment

Electronics andelectrotechnicalproducts

% of total export of goods

Export of Goods from Finland in 1960 – 2010

Source: Finnish Customs / Export of Goods

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Export and Import of Goods from and to Finland All countries

10 000

20 000

30 000

40 000

50 000

60 000

70 00019

87

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

Import of Goods Export of Goods

Million euros at current prices

Source: Board of Customs / Export of Goods

*) The level of 1-6/2011 annualised.

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Export and Import of Goods from and to Finland Foreign Trade of Goods Between Finland and The States

Source: Board of Customs / Export of Goods

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 00019

87

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

*

Imports from USA Exports to USA

Billion euros at current prices

*) The level of 1-6/2011 annualised.

2007 – 2011Share of exports: 6.8 %Share of imports: 3.3 %

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Export and Import of Goods from and to Finland Foreign Trade of Goods Between Finland and The States 2008 – 06/2011

Source: Board of Customs / Export of Goods

9,9 %14,8 %

19,6 %20,1 %

8,2 %5,9 %6,2 %

56,7 %52,8 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

IMPORTS TO FINLAND EXPORTS FROM FINLAND

Primary production Food etc. Textiles etc. Forrest industry

Chemical industry Technology industry Other industry Others

Trade of Goods, share (%)