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The OECD estimates that the complexity of social security benefits and taxation undermines the incentive for work in Finland. The OECD's 2018 country report quotes the good growth rate of the Finnish economy, but recommends reforming taxation and social security. Digitalization and automation are changing the labor market, so action is also needed because of technology change. Finland's special challenge is to see a lower employment rate than the other Nordic countries. Better employment incentives are proposed as a means of raising the employment rate.

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 (65.5%), followed by manufacturing and refining (31.6%). Primary production is at 2.9%.

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 has suddenly slowed in the wake of the international financial crisis. GDP growth shrank from 1% in 2008 to -7.8% in 2009 (the sharpest contraction since Finland gained independence from Russia in 1917). Exports declined 32%, and unemployment climbed to 8.2%. Inflation is expected to rise from 0% in 2009 to 0.1% in 2010. The government responded with a series of stimulus packages with an estimated impact of over 6 billion euros. The government foresees weak growth in 2010, which has been jeopardized by a costly dockworkers strike. It also forecasts difficult years ahead as it struggles to balance finances as the baby boom generation retires.

Exports of goods and services contribute over 40% 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 3.4% share of imports in 2009, the United States was Finland's ninth-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 2009, the United States was Finland's third-largest customer after the EU (55.6%), and Russia (9%). However, trade is only part of the totality: the 10 biggest Finnish companies in the United States have a combined turnover that is three times the value of Finland's total exports to the United States. 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.



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Page last modified: 12-09-2018 18:50:59 ZULU