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Five reasons why the Finnish economy is bogged down

Past recessions have come and gone, so why does it seem that the Finnish economy is now bouncing back so slowly? Experts interviewed by Yle see five main factors that are hindering growth.

Rahtilaivojen lastausta Vuosaaren satamassa.
Image: Yle

1. Exports markets still suffering

The global economy continues to feel the effects of the financial crisis that struck in 2008.

The United States has yet to make a recovery and economies in Finland's immediate surroundings in Europe are only creeping forward. When trading partners suffer, exports suffer. In addition, key Finnish exports are investment goods such as machinery and wood products.

2. Faltering domestic demand

The poor state of the economy, unemployment, and regular news of companies downsizing personnel have made the Finns cautious consumers.

3. Loss of industrial footing

The electronics sector driven by Nokia has all but gone flat. The country's wood processing industry is in deep trouble. The paper industry's share of GNP has slowly declined for the past decade.

4. Aging population

The post-war baby boom in Finland was bigger than in other European countries. Larger segments of the population are now retiring earlier than elsewhere in Europe. The population of Europe continues to expand while it started to go into decline in Finland in 2010.

5. Poor competitiveness

Wages and salaries in Finland are still around 10 percent higher than in its main trading partners. Major pay rises were contracted just before the downswing in the economy and before the worst effects of the 2008 international financial crisis hit. Even though the level of wages is not exceptionally high, and recent pay package increases were small, it still weakens the nation's competitive position because of lower levels of the volume of production.

 

This item was based on interviews for a Yle Finnish-language article by Liisa Karvinen with Olli Koski, Chief Economist for the Central Organisation of Finnish Trade Unions SAK, and Lauri Kajanoja who is a Principal Adviser at the Bank of Finland responsible for domestic economic policy issues.

 

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