Economic Growth Finland

FINLAND

1. REAL GDP PER CAPITA
In the past century Finland has gone from a weak economy based on the agrarian sector, to dominate higher and sophisticated electronic markets and it also has one of the higher standards of live not only in the European Union but also all over the world. However, the path to success hasn't been exempt of hard moments that may be analyzed.
First ofallFinland’s Real GDP should be examined:

It is clear the successful performance of their economy, but to analyze the country’s economic activity this period should be divided in three subperiods:
Subperiod1 1950-1980 5674,16 17844,83
Subperiod2 1980-1993 17980,53 18892,25
Subperiod3 1994-2007 19598,62 32486,15

At the ‘50s Finland was a devastated country due to the world wars, but in thesecond half of the century, Finns made a remarkable transformation from an agrarian economy to a diversified modern industrial one. In fact, GDP per capita is now the highest among OECD.
GDP growth (annual %) OECD- finland

*** source: world bank

From the ‘50s, industrial and economic development was based on an economy which was impulsed by the investment in which the main elements weremachinery, engineering and forestry industries; in that way they got the resources to increase welfare, and to develop public services such as creating the health service, educational system and social security which have turned Finland into a modern state of welfare. As we can see in the graph the positively tender is clear, but in the first years of70’s their GDP per capita undergo a hugegrowth, increasing by 20% and reaching the levels of Japan and UK. And thanks to the free trade agreement with UE signed in 1973, the economy becomed more competitive. It took exports to rise which helped positively to increase in such a big proportion the country’s GDP.
In the `80s the GDP increased 4%, but the grow was based on debt: until `80s  the Bank of Finland controlled interest rates,foreign exchange rates, and import and export of currency, but then financial market was mostly deregulated, leading to a massive credit expansion largely based on foreign debt. This period is known in Finland as kasinotalous; “casino economy”. But this crisis not only affected Finland but also all Nordic countries which had to provide public support to their banks. As we can see, GDP contracted for 3years consecutively and declined by more than 10%, unenployment also increased to 1/5 of the workforce, reaching 20% (rose from 3%).

The depression of the ‘90s was a big punish for Finland’s economy. It can be explained because some factors: the productive sectorcollapsed dragging other sectors,andthe Soviet bloc (principal neighbor and trading partner) fell so there was a huge decline intrade. At that time the country had its own currency, the Finnish markka, which cut down victim to currency speculation and caused interest rates to increase sharply.Finally, after devaluating their currency in 1993 the depression bottomed out; the GDP at that time was at the same level as in the previous decade.
Finnish economy recovered well from the recession in the early 1990 and since then hasgrown relatively quickly. The key factors that led to Finland's GDP growth were the commitment by the Government and companies (such as Nokia) with information and communications technology (ICT) sector combined with significant improvement of productivity and competitiveness in the private sector. In fact, the trend in Finland’s productivity has been good by international standards and betterthan the OECD average. Thanks to that measures from 1994 to 2000 the average annual growth of GDP to 4,7%
In 2002 Finland was one of the first countries in which the Euro, the common currency, was introducedthereby giving up to the finnish makkra. Refering to the performance in the first years of the century, the average annual growth of GDP was 3.5% between 2001-2007.

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