Finland was a province and then a grand duchy under Sweden from the 12th to the 19th centuries, and an autonomous grand duchy of Russia after 1809. It gained complete independence in 1917. During World War II, Finland successfully defended its independence through cooperation with Germany and resisted subsequent invasions by the Soviet Union - albeit with some loss of territory. In the subsequent half century, Finland transformed from a farm/forest economy to a diversified modern industrial economy; per capita income is among the highest in Western Europe. A member of the EU since 1995, Finland was the only Nordic state to join the euro single currency at its initiation in January 1999. In the 21st century, the key features of Finland's modern welfare state are high quality education, promotion of equality, and a national social welfare system - currently challenged by an aging population and the fluctuations of an export-driven economy.
Northern Europe, bordering the Baltic Sea, Gulf of Bothnia, and Gulf of Finland, between Sweden and Russia
timber, iron ore, copper, lead, zinc, chromite, nickel, gold, silver, limestone
Population - distribution
the vast majority of people are found in the south; the northern interior areas remain sparsely populated
Finnish (official) 88.3%, Swedish (official) 5.3%, Russian 1.4%, other 5% (2016 est.)
HELSINKI (capital) 1.18 million (2015)
- Conventional long form
- Republic of Finland
- Conventional short form
- Local long form
- Suomen tasavalta/Republiken Finland
- Local short form
- Geographic coordinates
- 60 10 N, 24 56 E
- Time difference
- UTC+2 (7 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins last Sunday in March; ends last Sunday in October
accepts compulsory ICJ jurisdiction with reservations; accepts ICCt jurisdiction
Finland has a highly industrialized, largely free-market economy with per capita GDP almost as high as that of Austria and the Netherlands and slightly above that of Germany and Belgium. Trade is important, with exports accounting for over one-third of GDP in recent years. The government is open to, and actively takes steps to attract, foreign direct investment.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -2,551,060,853
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 86,569,644,896
- Exports of goods and services
- US$ 83,710,242,733
- Total Merchandise Trade
- FDI, net inflows
- US$ -9,537,496,212
- Commercial Service Exports
- US$ 25,411,483,457
barley, wheat, sugar beets, potatoes; dairy cattle; fish
metals and metal products, electronics, machinery and scientific instruments, shipbuilding, pulp and paper, foodstuffs, chemicals, textiles, clothing
- electrical and optical equipment, machinery, transport equipment, paper and pulp, chemicals, basic metals; timber
- Germany 13.9%, Sweden 10.1%, US 7%, Netherlands 6.6%, Russia 5.9%, UK 5.2%, China 4.7% (2015)
- foodstuffs, petroleum and petroleum products, chemicals, transport equipment, iron and steel, machinery, computers, electronic industry products, textile yarn and fabrics, grains
- Germany 17%, Sweden 16.1%, Russia 10.9%, Netherlands 9%, Denmark 4.1% (2015)
- Country Risk Rating
- Changes in generally good but somewhat volatile political and economic environment can affect corporate payment behavior. A basically secure business environment can nonetheless give rise to occasional difficulties for companies. Corporate default probability is quite acceptable on average.
- Business Climate Rating
- The business environment is very good. Corporate financial information is available and reliable. Debt collection is efficient. Institutional quality is very good. Intercompany transactions run smoothly in environments rated A1.
- Prudent economic policies
- Skilled workforce and favorable business climate
- Cutting-edge industries
- High standard of living
- Highly vulnerability to the international situation
- Industrial crisis and loss of competitiveness
- Dependence of the Finnish banking sector on the Swedish and Danish financial sectors
- Aging population
After sluggish growth in 2015, the economy saw a slight recovery in 2016, thanks to private consumption and dynamic investment. In 2017, growth should remain moderate, supported by growth in private investment and exports. Indeed, the industrial sector (25% of GDP) would see a progressive recovery through investment in energy as well as in the forestry and shipbuilding industries. These industries would benefit from a more dynamic foreign demand and the government's policy to improve business competitiveness. Low interest rates favor residential investment and construction, and growth will also be observed in the services sector (75% of employment).
Moreover, private consumption would be less dynamic than in previous years, limited by an agreement between social partners providing for slower growth in wages until the end of 2017. In addition, the still high level of unemployment (8.8%), fiscal austerity and the household debt burden (120% of disposable income) would continue to hamper growth in private consumption. However, the purchasing power of households would improve to the extent that real wages would see a slight increase, in a context of still modest inflation (albeit slightly increasing). Dependence on exports in the economy (37% of GDP) and demand from its main trading partners (Russia, Germany and the Nordic countries) could affect the business activity in case of a slowdown in demand in these countries.
In 2017 the government's priority will remain focused on the fight against unemployment and the revival of the industrial sector, which continues to suffer from low competitiveness. A Competitiveness Pact was signed with social partners in late 2016 with the aim of reducing unit labor costs by 4% in 2017. The main measures concern the extension of the annual working time (additional 24 hours without wage compensation), a transfer of a portion of employer charges to employee contributions and wages, which would increase less rapidly. The authorities have nevertheless granted households a reduction in income tax in order to offset rising social security contributions. In addition, the government would invest more in infrastructure, especially in transport. This policy would be funded by budget cuts in education and in R&D and by the reform of the social security system which would see this power transferred to local institutions (economies of scale). Thus, the budget deficit would still be below 3% but public debt would continue to rise slightly, while remaining relatively low compared to other countries in the Eurozone.
Meanwhile, the implementation of this policy would have a positive impact on the current account, which would be close-to-balance. Exports would be improve especially in the pharmaceutical, petrochemical and in the forest industry, driven by better competitiveness and an increase in orders. Furthermore, the electronics sector would benefit from the recovery (early 2017) on the smartphones market observed in the Nokia brand, purchased from Microsoft by a Finnish company. Nevertheless, the increase in imports would halt the improvement observed in the current account in 2017, due to a more dynamic domestic demand and a moderate increase in oil prices.
Finnish voters entrusted power to the Centre Party in the parliamentary elections held in April 2015. The coalition government, which also includes the Finns Party (far right) and the National Coalition, the center-right party, holds a comfortable majority in parliament (124 seats out of 200). However this coalition is weak, insofar as the withdrawal of one of the three parties would cause a loss of majority for the government. Moreover, the opposition parties have been strengthened following the unpopularity of the Competitiveness Pact reforms, which aim to reduce unit labor costs and improve competitiveness. The Social Democratic Party even came out ahead according to a poll conducted in October 2016. The government will be judged on the results of its reform plan, particularly in terms of unemployment.
The business environment remains very favorable as the country ranks 13th out of 190 in the latest Doing Business report published by the World Bank, with particularly remarkable performance in insolvency settlement.