Finland's Economy Begins to Revive After Deep Slump
THE Finnish economy is quickly emerging from its deepest recession in decades. After a dramatic three-year slump, the Nordic nation expects to have the fastest growth rate in the Western world in 1995, according to the Organization of Economic Cooperation and Development (OECD).
Between 1990 and '93, the country's gross domestic product plunged 15 percent. The slump has been the deepest in Finland's peacetime history. Finland has a per capita gross national product roughly the same as Canada, the Netherlands, or Italy. Even before the latest recession, Finland's small, export-driven economy had experienced roller coaster-like ups and downs.
During the '80s, Finland enjoyed a relatively high growth rate. Now the boom years are returning, suggests the OECD, which predicts 1.9 percent growth for 1994 and 4.7 percent for 1995.
``An acceleration of output growth is expected for this year and next, as domestic demand gradually recovers and export growth remains strong,'' says the Paris-based group of industrial democracies in its latest Economic Outlook.
This coincides with recent estimates of the Ministry of Finance and various Finnish research institutes, all of which forecast 4 percent to 6 percent growth next year.
The 5 million-strong nation was hit hard by the collapse of the Soviet Union, a major trade partner in the '80s, and by weak demand for its forestry and engineering products in the West. But exports slowly gained momentum after the devaluation of the Finnish markka in 1992.
The recovery has been boosted by soaring exports, increasing by 8.5 percent in the early months of 1994. This has created a trade surplus of about $3 billion during the past six months. The 1.2 percent yearly inflation rate is one of the lowest in Europe. Finnish industrial output rose by 15.5 percent in May, and the total economic output grew by 6.5 percent in the same period, according to the government-run Statistics Finland.
The figures have surprised even the Ministry of Finance. ``The growth in the beginning of this year clearly supports the view that the prognosis for growth can be upgraded a little,'' says Immo Pohjola of the Finance Ministry.
Not all economic indicators are as bright, however. The budget deficit is still alarmingly big; Finland's foreign debt has ballooned; and interest rates remain high.
Jukka Pekkarinen, director of the Labor Institute of Economic Research, recently warned that unless real interest rates come down, recovery may founder.
``The high interest rates threaten the steadily developing economic growth,'' the Helsingen Sanomat newspaper claimed in a recent editorial, urging the government to cut the budget deficit. ``Growth will end abruptly and employment will not improve fundamentally, if new investments can't get started.''
Many economists worry that despite austerity measures, the budget deficit shows no signs of stabilization. ``You must have an economic policy with long-term benefits. There has to be a signal that something will be done to the persistent budget deficit,'' says Jouko Yia-Liedenpohja of the University of Tampere.
According to Statistics Finland, unemployment is still 17.9 percent, the worst in Europe after Spain.
The OECD forecasts that the unemployment rate will fall only gradually to 17.7 percent in 1995. In October 1990, the unemployment rate was just 3.2 percent.
Recovery will depend in part on whether Finland joins the European Union. A referendum on EU membership will be held in October. Membership would strengthen Finland's economy, according to a study by the Ministry of Trade and Industry.