Economy of Finland

| current account = $1.806 billion (2017 est.)

€142.507 billion (2019)

Scope: AA+ Outlook: Negative

| reserves = $24.3 billion (2026 est.)

Finland has a highly developed social market economy. It has a per capita output similar to that of western European economies such as France, Germany, and the United Kingdom. The largest sector the Finnish economy is its service sector, which contributes 72.7% to the country's gross domestic product (GDP); followed by manufacturing and refining at 31.4%; and the primary sector at 2.9%. Among OECD nations, it has a highly efficient and strong social security system; social expenditure stood at roughly 29% of GDP.

Finland's key economic sector is manufacturing. The largest industries are electronics (21.6% - very old data), machinery, vehicles and other engineered metal products (21.1%), forest industry (13.1%), and chemicals (10.9%). Finland has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around 2 billion euro annually) are politically sensitive to rural residents. The Helsinki metropolitan area generates around a third of GDP.

In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largest in the world, after Ireland. Investment was below the expected levels. The overall short-term outlook was good and GDP growth has been above many of its peers in the European Union. Finland has the 4th largest knowledge economy in Europe, behind Sweden, Denmark and the UK. The economy of Finland tops the ranking of the Global Information Technology 2014 report by the World Economic Forum for concerted output between the business sector, the scholarly production and the governmental assistance on information and communications technology.

thumb|[[Aviapolis, Vantaa is one of the most significant growing economic areas in Finland.]]

Finland is highly integrated in the global economy, and international trade represents a third of the GDP. Trade with the European Union represents 60% of the country's total trade. The largest trade flows are with Germany, Russia, Sweden, the United Kingdom, the United States, the Netherlands and China.

History

Being geographically distant from Western and Central Europe in relation to other Nordic countries, Finland lagged behind in terms of industrialization apart from the production of paper, which partially replaced the export of timber solely as a raw material towards the end of the nineteenth century. But as a relatively poor country, it was vulnerable to shocks to the economy such as the great famine of 1867–1868, which killed around 15% of the country's population. Until the 1930s, the Finnish economy was predominantly agrarian and, as late as the 1950s, more than half the population and 40% of output were still in the primary sector.

After World War II

While nationalization committees were set up in France and the United Kingdom, Finland avoided nationalizations. Finnish industry recovered quickly after the Second World War. By the end of 1946, industrial output had surpassed pre-war numbers. In the immediate post-war period of 1946 to 1951, Finnish industry continued to grow rapidly. However, the Finnish communist party (Finnish People's Democratic League) received 23.2% of the votes in the 1958 parliamentary elections. Savings rates in Finland hovered among the world's highest, at around 8%, all the way to the 1980s. In the beginning of the 1970s, Finland's GDP per capita reached the level of Japan and the UK. Finland's economic development was similar to some export-led Asian countries.

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 in the local markets. Slow growth with other trading partners, and the disappearance of the Soviet bilateral trade had its effects. The stock market and the Finnish housing market decreased by 50% in value. The growth in the 1980s was based on debt, and when the defaults began rolling in, GDP declined by 13%. Unemployment increased from almost full employment to one fifth of the workforce. The crisis was amplified by the trade unions' initial opposition to any reforms. Politicians struggled to cut spending and the public debt doubled to around 60% of GDP.

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.

Data

thumb|GDP per capita development in Norway, Iceland, Denmark, Sweden and Finland

The following table shows the main economic indicators in 1980–2017. Inflation under 2% is in green. Estimates begin after 2021.

{| class="wikitable sortable" style="text-align:center;"

!Year

!GDP (in Bil. Euro)

!GDP per capita (in Euro)

!GDP

(in Bil. US$ PPP)

!GDP

(in Bil. US$ nominal)

!GDP growth (real)

!Inflation rate (in%)

!Unemployment (in%)

!Government debt (in % of GDP)

|1980

|33.7

|7,059

|45.5

|53.7

|5.7%

|11.6%

|5.3%

|10.9%

|1981

|38.1

|7,957

|50.5

|52.6

|1.3%

|12.0%

|5.7%

|11.5%

|1982

|42.8

|8,901

|55.3

|53.1

|3.1%

|9.3%

|6.1%

|13.9%

|1983

|47.8

|9,870

|59.2

|51.0

|3.1%

|8.4%

|6.1%

|15.4%

|1984

|54.5

|10,986

|63.3

|53.0

|3.2%

|7.0%

|5.9%

||15.2%

|1985

|58.3

|11,910

|67.6

|56.2

|3.5%

|5.8%

|6.0%

|15.8%

|1986

|62.7

|12,776

|70.9

|73.7

|2.7%

|2.9%

|6.7%

|16.4%

|1987

|67.8

|13,755

|75.2

|91.8

|3.6%

|4.1%

|4.9%

|17.6%

|1988

|76.8

|15,542

|81.9

|109.3

|5.2%

|5.1%

|4.2%

|16.5%

|1989

|85.9

|17,344

|89.5

|119.1

|5.1%

|6.6%

|3.1%

|14.3%

|1990

|91.0

|18,296

|93.0

|141.7

|0.7%

|5.0%

|3.2%

|13.8%

|1991

|87.0

|17,398

|90.5

|128.2

|−5.9%

|4.5%

|6.7%

|21.8%

|1992

|84.9

|16,873

|89.5

|113.1

|−3.3%

|3.3%

|11.8%

|39.3%

|1993

|85.7

|16,963

|91.0

|89,3

|−0.7%

|3.3%

|16.5%

|54.1%

|1994

|90.8

|17,875

|96.7

|103.7

|3.9%

|1.6%

|16.7%

|56.1%

|1995

|98.6

|19,329

|102.9

|134.3

|4.2%

|0.4%

|15.5%

|55.1%

|1996

|102.1

|19,946

|108.6

|132.2

|3.7%

|1.0%

|14.6%

|55.3%

|1997

|110.7

|21,577

|117.5

|127.1

|6.3%

|1.2%

|12.7%

|52.2%

|1998

|120.4

|23,387

|125.3

|134.2

|5.4%

|1.3%

|11.5%

|46.9%

|1999

|126.9

|24,599

|132.6

|135.4

|4.4%

|1.3%

|10.3%

|44.0%

|2000

|136.3

|26,349

|143.4

|126.1

|5.6%

|3.0%

|9.9%

|42.5%

|2001

|144.4

|27,878

|150.5

|129.5

|2.6%

|2.7%

|9.2%

|40.9%

|2002

|148.3

|28,545

|155.4

|140.3

|1.7%

|2.0%

|9.2%

|40.2%

|2003

|151.6

|29,112

|161.7

|171.7

|2.0%

|1.3%

|9.1%

|42.7%

|2004

|158.5

|30,361

|172.6

|197.4

|3.9%

|0.1%

|8.9%

|42.6%

|2005

|164.4

|31,392

|183.0

|205.0

|2.8%

|0.8%

|8.5%

|39.9%

|2006

|172.6

|32,844

|196.3

|217.1

|4.1%

|1.3%

|7.8%

|38.1%

|2007

|186.6

|35,358

|212.2

|256.4

|5.2%

|1.6%

|7.0%

|34.0%

|2008

|193.7

|36,545

|218.0

|285.7

|0.7%

|3.9%

|6.4%

|32.6%

|2009

|181.0

|33,988

|201.7

|253.2

|−8.3%

|1.6%

|8.3%

|41.7%

|2010

|187.1

|34,962

|210.6

|249.6

|3.0%

|1.8%

|8.5%

|47.1%

|2011

|196.9

|36,625

|220.5

|275,6

|2.6%

|3.3%

|7.8%

|48.5%

|2012

|199.8

|36,990

|221.3

|258.5

|−1.4%

|3.2%

|7.7%

|53.9%

|2013

|203.3

|37,470

|225.7

|271.4

|−0.8%

|2.2%

|8.2%

|56.5%

|2014

|205.5

|37,693

|228.1

|274.9

|−0.6%

|1.2%

|8.7%

|60.2%

|2015

|209.6

|38,307

|232.9

|234.6

|0.1%

|0.2%

|9.4%

|63.6%

|2016

|215.8

|39,322

|246.9

|240.7

|2.1%

|0.4%

|8.8%

|63.0%

|2017

|224.3

|40,753

|262.1

|255.6

|3.0%

|0.8%

|8.7%

|61.4%

|2018

|226.8

|41,142

|271.4

|275.8

|1.1%

|1.2%

|7.4%

|64.8%

|2019

|229.6

|41,609

|279.7

|268.6

|1.2%

|1.1%

|6.7%

|64.9%

|2020

|224.2

|40,576

|276.7

|271.7

|-2.2%

|0.4%

|7.8%

|74.7%

|2021

|231.0

|41,748

|298.3

|297.0

|2.9%

|2.1%

|7.6%

|72.6%

|2022

|235.8

|42,507

|324.3

|283.1

|n/a

|7.2%

|6.8%

|74.8%

|2023

|235.9

|42,510

|335.8

|305.7

|n/a

|5.3%

|7.5%

|74.4%

|2024

|238.9

|43,053

|347.0

|316.3

|n/a

|2.5%

|7.5%

|75.9%

|2025

|242.1

|43,621

|358.7

|327.6

|n/a

|2.2%

|7.4%

|77.8%

|2026

|245.3

|44,221

|371.4

|339.9

|n/a

|2.0%

|7.3%

|79.5%

|2027

|248.4

|44,802

|384.3

|351.1

|n/a

|2.0%

|7.2%

|80.9%

|2028

|251.5

|45,390

|397.8

|362.8

|n/a

|2.0%

|7.1%

|82.1%

Agriculture

thumb|An oxeye daisy and a cow in [[Kyyjärvi, Central Finland]]

Finland's climate and soils make growing crops a particular challenge. The country lies between 60° and 70° north latitude - as far north as Alaska - and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, and because of the relatively low elevation of the land area, Finland contains half of the world's arable land north of 60° north latitude. In response to the climate, farmers have relied on quick-ripening and frost-resistant varieties of crops. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralise excess acid and to develop fertility. Irrigation was generally not necessary, but drainage systems were often needed to remove excess water. Outsourcing resulted in more manufacturing being transferred abroad, with Finnish-based industry focusing to a greater extent on R&D and hi-tech electronics.

Electronics

The Finnish electronics and electrotechnical industry has evolved from early electrical machinery manufacturing in the late 19th century to a major contributor to global telecommunications and industrial automation. During the 1990s and early 2000s, Nokia became one of the world's leading mobile phone producers, and Finland briefly held a dominant position in global mobile phone market and network infrastructure. Although Nokia's consumer market share declined after 2010, the company remains a significant global supplier of 5G networking equipment through Nokia Networks. Finnish industry today emphasizes high-technology components, measurement systems, and automation solutions. Examples are firms such as Vaisala who specialize in meteorological instrumentation and ABB Finland producing industrial robotics and power systems. Strong investment in research and development—regularly among the highest per capita in the world— continues to support innovation in Finland's advanced electronics manufacturing and telecommunications technology.

Metals, engineering and manufacturing

Finland has an abundance of minerals, but many large mines have closed down, and most raw materials are now imported. For this reason, companies now tend to focus on high added-value processing of metals. The exports include steel, copper, chromium, gold, zinc and nickel, and finished products such as steel roofing and cladding, welded steel pipes, copper pipe and coated sheets. Outokumpu is known for developing the flash smelting process for copper production and stainless steel.

In 2019, the country was the world's 5th largest producer of chromium, the 17th largest world producer of sulfur and the 20th largest world producer of phosphate

With regard to vehicles, the Finnish motor industry consists mostly of manufacturers of tractors (Valtra, formerly Valmet tractor), forest machines (f.ex. Ponsse), military vehicles (Sisu, Patria), trucks (Sisu Auto), buses and Valmet Automotive, a contract manufacturer, whose factory in Uusikaupunki produces Mercedes-Benz cars. Shipbuilding is an important industry: the world's largest cruise ships are built in Finland; also, the Finnish company Wärtsilä produces the world's largest diesel engines and has market share of 47%. In addition, Finland also produces train rolling stock.

The manufacturing industry is a significant employer of about 400,000 people.

Mining

Ahmavaara mine (Gold, copper, nickel)
Koivu mine (Titanium)
Konttijärvi mine (Gold, copper, nickel)
Mustavaara mine (Vanadium)
Portimo mine (Gold)
Siilinjärvi mine (Phosphates)
Suhanko mine (Gold, copper, nickel)

Chemical industry

The chemical industry is one of the Finland's largest industrial sectors with its roots in tar making in the 17th century. In 2006 it was still considered promising, even though it had not yet become "the new Nokia".

Pulp and paper industry

thumb|A freight train departing from a pulp mill in [[Äänekoski]]

Forest products has been the major export industry in the past, but diversification and growth of the economy has reduced its share. In the 1970s, the pulp and paper industry accounted for half of Finnish exports. Although this share has shrunk, pulp and paper is still a major industry, with 52 sites across the country. Several of large international corporations in this business are based in Finland. Stora Enso and UPM were placed No. 1 and No. 3 by output in the world, both producing more than ten million tons. M-real and Myllykoski also appear on the top 100 list.

Energy industry

One half of all the energy consumed in Finland goes to industry, one fifth to heating buildings and one fifth to transport.

Finland's energy supply is divided as follows (2024): nuclear power 37.5%, wind 24.4%, , hydroelectric power 17%, wood 11%, net imports 3.8%.

Lacking indigenous fossil fuel resources, Finland has been an energy importer. Since May 2023, Unit 3 of the Olkiluoto Nuclear Power Plant is producing electricity, up to 14 TWh per year. In 2024, only 3.8 % of the consumed electricity was imported. There are some uranium resources in Finland, but to date no commercially viable deposits have been identified for exclusive mining of uranium. However, permits have been granted to Talvivaara to produce uranium from the tailings of their nickel-cobalt mine.

Companies

thumb|right|[[Aleksanterinkatu, a commercial street in Helsinki]]

Notable companies in Finland include Nokia, the former market leader in mobile telephony; Stora Enso, the largest paper manufacturer in the world; Neste Oil, an oil refining and marketing company; UPM-Kymmene, the third largest paper manufacturer in the world; Aker Finnyards, the manufacturer of the world's largest cruise ships (such as Royal Caribbean's Freedom of the Seas); Rovio Mobile, video game developer most notable for creating Angry Birds; KONE, a manufacturer of elevators and escalators; Wärtsilä, a producer of power plants and ship engines; and Finnair, the largest Helsinki-Vantaa based international airline. Additionally, many Nordic design firms are headquartered in Finland. These include the Fiskars owned Iittala Group, Artek a furniture design firm co-created by Alvar Aalto, and Marimekko made famous by Jacqueline Kennedy Onassis. Finland has sophisticated financial markets comparable to the UK in efficiency.

Around 70-80% of the equity quoted on the Helsinki Stock Exchange are owned by foreign-registered entities. The larger companies get most of their revenue from abroad, and the majority of their employees work outside the country. Cross-shareholding has been abolished and there is a trend towards an Anglo-Saxon style of corporate governance. However, only around 15% of residents have invested in the stock market, compared to 20% in France, and 50% in the US. Invest in Finland and other programs attempt to attract investment. In 2000 FDI from Finland to overseas was 20 billion euro and from overseas to Finland 7 billion euro. Acquisitions and mergers have internationalized business in Finland.

Although some privatization has gradually taken place, there are still several state-owned companies of importance. The government keeps them as strategic assets or because they are natural monopolies. These include e.g. Neste (oil refining and marketing), VR (rail), Finnair, VTT (research) and Posti Group (mail). Depending on the strategic importance, the government may hold either 100%, 51% or less than 50% stock. Most of these have been transformed into regular limited companies, but some are quasi-governmental (liikelaitos), with debt backed by the state, as in the case of VTT.

In 2022, the sector with the highest number of companies registered in Finland is Services with 191,796 companies followed by Finance, Insurance, and Real Estate and Agriculture, Forestry, and Fishing with 159,158 and 102,452 companies respectively.

Household income and consumption

Finland's income is generated by the approximately 1.8 million private sector workers, who make an average 25.1 euro per hour (before the median 60% tax wedge) in 2007. According to a 2003 report, residents worked on average around 10 years for the same employer and around 5 different jobs over a lifetime. 62% worked for small and medium-sized enterprises. Female employment rate was high and gender segregation on career choices was higher than in the US. In 1999 part-time work rate was one of the smallest in OECD. Directly held public debt has been reduced to around 32% in 2007. In 2007, the average household savings rate was -3.8 and household debt 101% of annual disposable income, a typical level in Europe.

In 2008, the OECD reported that "the gap between rich and poor has widened more in Finland than in any other wealthy industrialised country over the past decade" and that "Finland is also one of the few countries where inequality of incomes has grown between the rich and the middle-class, and not only between rich and poor."

In 2006, there were 2,381,500 households of average size 2.1 people. Forty% of households consisted of a single person, 32% two and 28% three or more persons. There were 1.2 million residential buildings in Finland and the average residential space was 38 square metres per person. The average residential property (without land) cost 1,187 euro per square metre and residential land on 8.6 euro per square metre. Consumer energy prices were 8-12 euro cent per kilowatt hour. 74% of households had a car. There were 2.5 million cars and 0.4 other vehicles.

Around 92% have mobile phones and 58% Internet connection at home. The average total household consumption was 20,000 euro, out of which housing at around 5500 euro, transport at around 3000 euro, food and beverages excluding alcoholic at around 2500 euro, recreation and culture at around 2000 euro. Upper-level white-collar households (409,653) consumed an average 27,456 euro, lower-level white-collar households (394,313) 20,935 euro, and blue-collar households (471,370) 19,415 euro.

Unemployment

2015

The unemployment rate was 10.3% in 2015. The employment rate is (persons aged 15–64) 66.8%. Unemployment security benefits for those seeking employment are at an average OECD level. The labor administration funds labour market training for unemployed job seekers, the training for unemployed job seeker can last up to 6 months, which is often vocational. The aim of the training is to improve the channels of finding employment. As of October 2025, unemployment in Finland stood at 9.8%, which was the second highest rate in the European Union after Spain, and up from 8.7% the year prior. The EU wide unemployment rate was 6.0%.

2025

The unemployment rate was 10.6% in 2025.

Gross domestic product

Euro membership

The American economist and The New York Times columnist Paul Krugman has suggested that the short term costs of euro membership to the Finnish economy outweigh the large gains caused by greater integration with the European economy. Krugman notes that Sweden, which has yet to join the single currency, had similar rates of growth compared to Finland for the period since the introduction of the euro.

One reason for the popularity of the euro in Finland is the memory of a 'great depression' which began in 1990, with Finland not regaining its competitiveness until approximately a decade later when Finland joined the single currency.

Public policy

Finnish politicians have often emulated other Nordics and the Nordic model. Recently, Finland has topped the patents per capita statistics, and overall productivity growth has been strong in areas such as electronics. While the manufacturing sector is thriving, OECD points out that the service sector would benefit substantially from policy improvements. The IMD World Competitiveness Yearbook 2007 ranked Finland 17th most competitive, next to Germany, and lowest of the Nordics. while the World Economic Forum report has ranked Finland the most competitive country. Finland is one of the most fiscally responsible EU countries. According to the grand jury of the 2006 European Enterprise Awards, effective "entrepreneurial thinking" was held to be at the root of central Finland's position as "the most entrepreneur-friendly region in the world".

Product market

Economists attribute much growth to reforms in the product markets. According to OECD, only four EU-15 countries have less regulated product markets (UK, Ireland, Denmark and Sweden). Nordic countries were pioneers in liberalising energy, postal, and other markets in Europe. For instance, starting a business takes an average of 14 days, compared to the world average of 43 days and Denmark's average of 6 days. Property rights are well protected and contractual agreements are strictly honored.

Job market

According to the OECD, Finland's job market is the least flexible of the Nordic countries. Centralized agreements may hinder structural change as there are fewer incentives to acquire better skills, although Finland already enjoys one of the highest skill-levels in the world. with deductions applied, and directly funds the municipality (a city or rural locality). The state income tax is a progressive tax; low-income individuals do not necessarily pay any. The state transfers some of its income as state support to municipalities, particularly the poorer ones. Additionally, the state churches - Finnish Evangelical Lutheran Church and Finnish Orthodox Church - are integrated to the taxation system in order to tax their members. and effective marginal tax rates are very high. Value-added tax is 24% for most items. Capital gains tax is 30-34% and corporate tax is 20%, about the EU median. Property taxes are low, but there is a transfer tax (1.6% for apartments or 4% for individual houses) for home buyers. - restricting service supply and demand - though some taxation is avoided in the black market and self-service culture. Another study by Karlson, Johansson & Johnsson estimates that the fraction of the buyer's income entering the service vendor's wallet (inverted tax wedge) is slightly over 15%, compared to 10% in Belgium, 25% in France, 40% in Switzerland and 50% in the United States. Tax cuts have been in every post-depression government's agenda and the overall tax burden is now around 43% of GDP compared to 51.1% in Sweden, 34.7% in Germany, 33.5% in Canada, and 30.5% in Ireland.

High income workers, for instance someone making €10000/month gross, living in the city of Vantaa and using €3000/year on commuting to work, pay 33% income tax plus 7.94% social security payments (this varies mildly depending on the age of the worker, but for someone born in 1975, it is currently in the year 2024, 7.94%). This means that 40.94% of the gross income goes to taxes and tax like payments.

State and municipal politicians have struggled to cut their consumption, which is very high at 51.7% of GDP compared to 56.6% in Sweden, 46.9% in Germany, 39.3% in Canada, and 33.5% in Ireland. The Economist Intelligence Unit's ranking for Finland's e-readiness is high at 13th, compared to 1st for United States, 3rd for Sweden, 5th for Denmark, and 14th for Germany. Also, early and generous retirement schemes have contributed to high pension costs. In education, child nurseries, and elderly nurseries private competition is bottom-ranking compared to Sweden and most other Western countries. A tripling or quadrupling in any one generation of the numbers receiving schooling beyond the required minimum reflected the needs of a developing economy for skilled employees. Obtaining advanced training or education was easier for some than for others, however, and the children of white-collar employees still were more likely to become white-collar employees themselves than were the children of farmers and blue-collar workers. In addition, children of white-collar professionals were more likely than not to remain in that class.

The long trend of growth in living standards paired with diminishing differences between social classes was dramatically reversed during the 1990s. For the first time in the history of Finland income differences have sharply grown. This change has been mostly driven by the growth of income from capital to the wealthiest segment of the population.

References

External links

Current statistics from Statistics Finland
Economic indicators from Findicator
Tariffs applied by Finland as provided by ITC's Market Access Map, an online database of customs tariffs and market requirements.
Finland Exports, Imports and Trade Balance

History

After World War II

European Union

Data

Agriculture

Electronics

Metals, engineering and manufacturing

Mining

Chemical industry

Pulp and paper industry

Energy industry

Companies

Household income and consumption

Unemployment

2015

2025

Gross domestic product

Euro membership

Public policy

Product market

Job market

See also

References

External links