Liberalization
Like other Nordic countries, Finland has liberalized its system of economic regulation since late 1980s. Financial and product market regulations were modified. Some state enterprises were privatized and some tax rates were altered. In 1991, the Finnish economy fell into a severe recession. This was caused by a combination of economic overheating (largely due to a change in the banking laws in 1986 which made credit much more accessible), depressed markets with key trading partners (particularly the Swedish and Soviet markets) as well as local markets, slow growth with other trading partners, and the disappearance of the Soviet bilateral trade. Stock market and housing prices declined by 50%. The growth in the 1980s was based on debt, and when the defaults began rolling in, GDP declined by 13% and unemployment increased from a virtual full employment to one fifth of the workforce. The crisis was amplified by trade unions’ initial opposition to any reforms. Politicians struggled to cut spending and the public debt doubled to around 60% of GDP. Much of the economic growth in the 1980s was based on debt financing, and the debt defaults led to a savings and loan crisis. A total of over 10 billion euros were used to bail out failing banks, which led to banking sector consolidation. After devaluations, the depression bottomed out in 1993.
European Union
Finland joined the European Union in 1995. The central bank was given an inflation-targeting mandate until Finland joined the euro zone. The growth rate has since been one of the highest of OECD countries and Finland has topped many indicators of national performance.
Finland was one of the 11 countries joining the third phase of the Economic and Monetary Union of the European Union, adopting the euro as the country’s currency, on 1 January 1999. The national currency markka (FIM) was withdrawn from circulation and replaced by the euro (EUR) at the beginning of 2002.
Industry in Finland is the second largest sector of Economy of Finland after the service sector. The production of different branches was in 2013 as follows:
- metal industry 37%
- chemical industry 26%
- forest industry 19%
- food, alcohol,and tobacco industries 11%
- other manufacturing 5%
- mining 1.5%
- textile and leather industry 0.7%.
Metal industry is divided to several branches. Finnish exports in 2014 included metals and metal products worth of 14.4%, machinery 12.8%, electronics 12% and vehicles 5.9%. Exports of electronics had decreased since the top years. Shipbuilding (Valmet, Wärtsilä) has long traditions. It In 2014, there were eight shipyards in Finland. They employ 20 000 people and export 90% of their production. Nokia and its subcontractors in mobile phones have dominated electronics.
Chemical industry is providing roughly one quarter of Finland’s industrial production and exports. It employs directly 34 000 people. Neste Oil is the largest company in chemical industry.
Forest industry in Finland is at the moment providing a fifth of Finland’s exports, a bit less of all industrial production and 15% of jobs. Its relative importance for Finnish economy has been decreasing significantly since the 1960s.