Finnish Economy on the Mend, Posts Fastest Growth in EU

After a protracted slump, the Finnish economy is experiencing a marked upswing, exhibiting the EU's fastest growth rate amid booming exports to neighboring countries, including Russia.

According to an estimate by Aktia Bank, Finland is among those countries benefitting the most from current global economic growth. The Nordic nation's economy has picked up steam, achieving 3.1 percent GDP growth, more than all figures promised in previous forecasts. The industry's order books are well-stocked and exports are booming.

"Right now, Finland has the highest [GDP] growth in Europe, amid record low inflation. This benefits our competitiveness and the country's export industry," Aktia chief economist Heidi Schauman told Hufvudstadsbladet daily.

Finnish exports to fellow Baltic Sea countries like Germany, Sweden and Russia are flourishing. The Russian economy, which is now posting GDP growth of around 2 percent, has benefitted greatly from higher oil prices, which, in turn, has galvanized Finnish exports of raw materials eastward.

At present, the global economy is characterized by increasingly strong growth, with economies like those of China and Brazil growing at an average rate of 4.8 percent annually. Europe's growth is considerably more modest, at 2.2 percent. According to Aktia's prognosis, Finland's economy will continue to perform better than the EU average, growing by 2.6 percent next year.

"China has taken over as the engine of global growth, which makes us increasingly dependent on the economic development of Asian economies," Schauman argued.

Earlier this month, a new 8,000 kilometer train route linked Finland to the Chinese market via Russia and Kazakhstan.
The link, which stretches from Kouvola in Finland to Xi'an in China, runs via St. Petersburg, Moscow and Kazakhstan, reducing the delivery time to 10 days. Once part of the Russian Empire, Finland uses the same 1520 mm railway gauge as Russia and Kazakhstan.

In Kouvola, the rail link was described as a "vitamin injection" for the city, which is aspiring to become a focal point for freight traffic between Asia and Europe, national Finnish broadcaster Yle reported.

Ensimmäinen juna lähtövalmiina. pic.twitter.com/UgfbCUOFtS

— Kouvola Innovation (@KinnoKouvola) November 10, 2017

​Aktia's bright forecast is well in line with figures released by Statistics Finland and the Confederation of Finnish Industries (EK). The recent EK survey, based on interviews with over 1,300 domestic companies, indicated businesses' solid trust in economic growth, with the confidence curve rising for manufacturing, construction, retail and service industries.

The recent survey by Statistics Finland indicated that 47 percent of Finns assume that their economic situation will improve further next year.

While Finland's economic success has also created more jobs, the nation's able-bodied population is steadily decreasing. Since 2010 alone, the Finnish labor market has been reduced by about 110,000 people amid a generation shift.

The Nordic nation's skewed population pyramid, characterized by a growing percentage of retirees, puts the Finnish economy under increased stress, leaving fewer taxpayers.

According to Aktia's data, however, the employment rate has risen to 70 percent, which is still below the government target of 72 percent.

The 2009 financial crisis wiped out over 8 percent of Finland's GDP. To make matters worse, iPhone and smartphones from Asia destroyed the once-impressive market share of Finland's national brand Nokia, halving its mobile phone sales from over 120 million in 2010 in just two years' time. Finland's GDP shrank further amid Western trade sanctions against Russia. Since 2014, as much as half of the €15 billion in trade with the country's eastern neighbor has vanished.