I just put up a post on the economic situation of Finland. Now I am putting another. Why the sudden interest? What is there about the Finnish economy which could be of interest to more people than the five million or so who actually live there?
Well basically I am trying to follow a hunch. I think – as most Afoe readers will already know – that the median age of a society is an important piece of information. Well, if we look at the global median age ranking, we will see that Finland is conveniently placed in 4th position:
Having noted this, it is perhaps worth adding that Finland has a Total Fertility Rate (TFR) of nearly 1.8 (significantly above that of Japan, Germany and Italy which are all around 1.3).
Finland also has a life expectancy of 78.35 (Japan 81.15, Germany 78.65, Italy 79.68 Italy). Interestingly Finland has a net migration rate of 0.87 (Japan 0, Germany 2.18 Italy 2.07 and – for comparison purposes – United States 3.31- all of this per 1,000 population).
So much for the demography. What about the economic performance? Well, I linked this page on the last post. What we can see is that Finnish growth since 2000 hasn’t been too bad, but it has been a little erratic. 1% in 2001, 2 point something % in 2002 and 2003, 3.6 per cent in 2004, and now a projected 0.9% this for year. Not bad, you might say. Not as strong as the US, Uk or Spain, but hardly pathetic: a 2% per annum average.
It is important to remember here that 40% of Finnish GDP is for export, so this gives Finland tremendous resistance to weakness in domestic demand.
According to the statistics department:
“The disposable income of households increased by 5.4% per annum in real terms last year. Household income grew faster than the final consumption expenditure, so households’ savings rate rose to 2.8 per cent last year. Last year’s national income per capita was EUR 23,949, which is over EUR 1,000 higher than in the year before“.
Interesting, is the only comment I would make at this stage. This kind of limited data hardly proves anything conclusively, but it is interesting that savings are on the rise.
Unemployment details can be found here, and what can we see? Well that unemployment is reasonably high in Finland, at around 7 to 8% (this is no labour market model), that it is falling slightly, that the labour force is now stationary (and presumeably about to start falling: there was a 0% increase in the labour force between August 2004 and August 2005).
Inflation is currently around 1%. What is really interesting is the graph which shows inflation steadily declining from 2001 (the disinflation process) to early 2004 (by which time inflation was in negative territory, but this wasn’t a spike, this was a trend), then rising oil and commodity prices pushed it back up again. Looking at the graph I am reasonably convinced that Finland will be entering deflation the next time the world economy has a serious brush with recession. Doubly so given the high level of openness of the Finnish economy.
Deficit and debt figures can be found here. Accumulated government debt seems to have drifted down to a not very significant 40% of GDP in recent years, although the government has been running deficits since 1998.
Now there is one other reason for thinking about Finland and ageing: it is a country doesn’t normally score all that high on people’s ‘in need reform’ agendas. That is, we may, in the case of Finland be better able to separate out the demographic from the normal structural reform components on people’s agendas. Take Transparency International’s Corruption Perception Index for 2004 for the 25 EU Member States: Finland came in first.
The Growth Competitiveness Index, drawn up by the World Economic
Forum (WEF) also puts Finland in first place.
In the Quality of Life Index developed by the Economist Intelligence Unit Finland comes twelfth.
In the World Bank ‘Ease of Doing Business’ report 2005 Finland came 13th overall, but, unsurprisingly in view of what I said above, 84th in the hiring and firing index.
In the Responsible Competitive Index, elaborated by Accountability and the
Copenhagen Centre, Finland comes again first.
In conclusion this post is basically experimental, since it is more about me asking myself questions (and staking out an agenda of things to monitor), than it is about me trying to provide definitive answers. That’s why it is on Afem. If and when this firms up, I’ll do something similar for Afoe.
Also, here’s a convenient ‘factoid’ link for Finland
Finland has a highly industrialized, largely free-market economy, with per capita output roughly that of the UK, France, Germany, and Italy. Its key economic sector is manufacturing – principally the wood, metals, engineering, telecommunications, and electronics industries. Trade is important, with exports equaling two-fifths of GDP. Finland excels in high-tech exports, e.g., mobile phones. 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. Rapidly increasing integration with Western Europe – Finland was one of the 12 countries joining the European Economic and Monetary Union (EMU) – will dominate the economic picture over the next several years. Growth in 2003 was held back by the global slowdown but picked up in 2004. High unemployment remains a persistent problem.