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| Economy of Finland |
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| Wednesday,August 15,2007 Posted: 19:37 BJT(37 GMT) | | From:Finland Article type:Reproduced |
Finland has a highly industrialized, largely free-market economy, based on abundant forest resources, capital investments, and technology, with a per capita output in par with the United Kingdom, France, Germany, Sweden and Italy. Traditionally, Finland has been a net importer of capital to finance industrial growth. However, this trend was recently reversed, and Finland has become a net capital exporter. In the 1980s, Finland's economic growth rate was one of the highest of industrialized countries, and after the recovery from the 1992 depression, the economic competitiveness has been rated first in the world for several years.
The largest sector of the economy is services, but with respect to international trade, Finland's key economic sector is manufacturing - principally the telecommunications, electronics, paper and forestry, engineered metal and metal refining, and chemical 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 a failed monetary policy of a strong currency and the resulting run on the Finnish markka. Another forced devaluation followed in 1992. The financial problems were initially 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. An other contributing factor was the Finnish version of the Savings and Loan crisis, with the Bank of Finland and the Finnish government supporting failed Finnish banks for a total of over 10 billion euros.
The devalued markka promoted 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.
The recession caused serious unemployment problem as unemployment soared from 3,2 % in 1990 to 16,6 % in 1994. Unemployment continues to be a problem for Finland even though rapid growth of production after the recession and active employment policies have reduced unemployment to 7.7 % of the labor force in 2006. According to Bank of Finland's statistics, the estimated 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. Finland's main industries are electronics, machinery, chemical and paper production. Finnish-designed consumer products such as textiles, porcelain, and glassware are world-famous. The wood processing technology is one of the most developed in the world.
Farms tend to be small, but sizeable 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. Free education through the university level is available. The education system of Finland consists of parallel academic and vocational systems, where vocational education is available on the secondary and tertiary levels (unlike in the Anglo-Saxon system, where vocational education is tertiary). 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 of nine grade levels (six primary and three secondary). After this, they may elect to continue along an academic or vocational line, although it is not mandatory to continue studying after that point. 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, good security and low corruption in Finland has enhanced Finland's position as a gateway to Russia.
According to Transparency International, Finland shares the lowest level of corruption with Iceland and New Zealand in all the countries studied in their survey.
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 of the European 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.
Updated: August 2007 |
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