Home > Statistics > Annual national accounts > 2005 > Gross domestic product grew by 2.9 per cent last year

Gross domestic product grew by 2.9 per cent last year

According to Statistics Finland's revised preliminary data, the volume of Finland's GDP grew by 2.9 per cent last year. The initial preliminary data published in March put the rate of growth at 2.1 per cent. An industrial dispute in the paper industry lowered the domestic product by approximately one per cent last year. Last year's GDP was EUR 157 billion.

National Accounts for 2005 have now been compiled for the first time on the same basis as the revised National Accounts time series for 1975-2004 that were published in March 2006. An elaboration on the methodological changes can be found at: http://stat.fi/til/vtp/men_en.html. Apart from new data sources, the new methodology may also have been the reason why the growth figure for last year now deviates from the initial estimate.

Largest growth in the metal industry

Last year, the volume of primary production grew by 0.7 per cent from the year before. Value added, or production, in agriculture went up by 10 per cent thanks to good grain crops. By contrast, production in forestry declined by five per cent as fellings diminished.

In the processing industries, production went up by 3.6 per cent last year. The volume of value added in all manufacturing grew by 3.9 per cent. Production in the metal industry went up by 11 per cent. In the electronics industry the growth amounted to 17 per cent and in the manufacture of transport equipment to 15 per cent. Because of the industrial dispute, production in the paper industry fell by 11 per cent. The dispute also influenced energy supply, decreasing its production by six per cent. The volume of oil refining also diminished by seven per cent last year.

Production in construction continued lively and the volume of value added in construction grew by 2.5 per cent. Value added went up by just short of three per cent in building construction and by one per cent or so in civil engineering.

Production increased by 3.6 per cent in private services but diminished by 0.1 per cent in public services last year.

The increase in the value added generated by trade amounted to just under three per cent, with the biggest growth recorded in motor vehicle and retail trade sales. Hotel and restaurant activities increased by good one per cent. In transport and communications, production increased by five per cent; by barely seven per cent in telecommunications and by good four per cent in transports.

Financial intermediation and insurance activities increased by just short of five per cent. Real estate activities grew steadily by good two per cent and business activities by five per cent, with clearly the biggest increase recorded in provision of personnel. Public administration diminished slightly. Educational services remained on level with the previous year whereas health and social services increased by one per cent. Other community, social and personal services grew by 1.5 per cent.

Exports supported growth

The volume of demand in the national economy went up by five per cent last year. All demand items grew, with the biggest increase of 7.3 per cent recorded in exports. Consumption grew by 3.2 per cent and investments by 3.3 per cent.

Private final consumption expenditure increased by four per cent last year. Purchases of home appliances and electronics increased most. Altogether, purchases of durable consumer goods went up by 10 per cent, while those of non-durable goods and services only increased by three per cent.

The volume of government consumption expenditure increased by 1.6 per cent but government investments diminished by 10 per cent. By contrast, private investments increased by six per cent. The rate of investments in the economy rose slightly to 18.8 per cent. The total volume of investments in machinery, equipment and transport equipment was on level with the previous year, but investments in building construction increased by over six per cent. There was an increase of eight per cent in investments in computer software. Inventories grew by more than usual last year mainly because of unfinished ships.

The volume of exports grew by 7.3 per cent and that of imports by 12.3 per cent. Exports and imports increased more in services than in goods. The balance in goods and services showed a surplus of EUR 9 billion, but the surplus contracted by more than EUR 3 billion from the previous year.

Slight improvement in employment

According to national accounts, the number of employed persons increased by good one per cent and that of hours worked by just under one per cent last year. Jobs increased most in business activities, trade and construction.

According to Statistics Finland's labour force statistics, the rate of unemployment was 8.4 per cent, having been 8.8 per cent in the year before. The average number of unemployed persons was 220,000 last year. The rate of employment was 68 per cent, as against 67.2 per cent in the previous year.

The productivity of labour grew last year by 2.8 per cent in the private sector according to value added and 3.3 per cent according to output. The productivity of labour grew by 2.1 per cent in the total economy.

Price level remained stable

The economy's overall price level is estimated to have risen by 0.6 per cent last year as measured by the GDP price index. The index was lowered especially by decreases in the prices of the electronics industry and telecommunications.

The year-on-year rise in the consumer price index was 0.9 per cent, but the price index of household consumption expenditure in national accounts only rose by 0.3 per cent. The disparity is explained by a difference in the way development in the prices of insurance, financial intermediation and housing services are measured in national accounts and in the consumer price index.

The terms of trade weakened by 3.5 per cent, as import prices rose by 4.5 per cent, but export prices by just under one per cent.

National income grew by 0.8 per cent in real terms

Net national income grew by 2.7 per cent in nominal terms last year, and was EUR 25,600 per capita. Last year, Finland's gross national income equalled gross domestic product, i.e. was EUR 157 billion. Gross national income grew by only one per cent in real terms and net national income by 0.8 per cent due to the weakened terms of trade.

Finnish households' wages and salaries went up by 4.9 per cent and employers' social contributions by good six per cent. Compensations of employees increased altogether by 5.1 per cent, and their share of the national income rose to 57.8 per cent. The corresponding share in the previous year was 56.4 per cent. Property and entrepreneurial income decreased by 2.9 per cent and their share of the national income was 27.4 per cent, as against 29.0 per cent in the year before.

Non-financial corporations' profits diminished slightly

Non-financial corporations' operating surplus, or operating profit, fell by two per cent from the year before. Their entrepreneurial income decreased by nearly seven per cent. Entrepreneurial income also takes into consideration property income and paid interest, and roughly corresponds with profit before payment of taxes and dividends.

Non-financial corporations paid two per cent less in direct taxes and four per cent less in dividends last year than in the year before.

Non-financial corporations' fixed investments in Finland grew by six per cent last year. The emissions trading that commenced in the European Union last year is estimated to have increased non-financial corporations' income by EUR 126 million. Non-financial corporations' net lending totalled good EUR 6 billion, having been EUR 9 billion in the year before.

Financial position of financial corporations showed surplus

The commission income of financial corporations grew but their net interest income (financial intermediation services indirectly measured) fell slightly from the previous year. The credit and deposit stocks increased but the interest margin on housing loans in particular declined further. The financial position of financial corporations showed a surplus of just short of EUR 1 billion as their dividend payments diminished clearly. The financial position of insurance corporations also showed a small surplus.

General government surplus EUR 4 billion

The financial position of central government continued to show a surplus last year. The surplus was of the same size order as in the year before, and was EUR 600 million. Funds external to the state budget also come under central government and showed a clear total surplus.

State revenues from indirect taxes grew by four per cent and those from direct taxed by three per cent. Income transfers to local government (incl. repayments of value added tax) went up by seven per cent but those to social security funds diminished by 1.6 per cent.

Central government's final consumption expenditure grew by good three per cent in nominal terms and good one per cent in real terms. Investments declined slightly.

The financial position of local government showed again a deficit of around EUR 1 billion. Tax revenues received by municipalities grew by four per cent. Final consumption expenditure went up by 5.6 per cent in nominal terms and by good one per cent in real terms. Investments are estimated to have remained on level with the previous year.

The financial surplus of employment pension funds was EUR 4.4 billion while other social security funds were more or less in balance.

The total financial position, or net lending, of general government showed a surplus of EUR 3.9 billion, or 2.5 per cent of GDP. As of 2003, the EMU deficit/surplus deviates slightly from the concept of net lending of general government used in national accounts, and was 2.7 per cent, having been 2.3 per cent in the previous year.

The proportion of public expenditure (excluding internal transfers) of GDP contracted to 50.3 per cent, having been 50.5 per cent in the year before.

The tax rate, or the proportion of taxes and statutory social security contributions of GDP, went up to 43.9 per cent from 43.6 cent in the year before.

Households' real income grew by good one per cent

The disposable income of households increased by only 1.5 per cent in nominal terms and by 1.2 per cent in real terms last year. The growth in disposable income was the slowest since 1996. Households' income decreased from dividends, for instance, from the record level of the previous year because of their revised treatment in taxation.

Gross income grew most because the wage sum went up by 4.9 per cent in consequence of the risen level of earnings. Social security benefits received by households went up by two per cent. Households' entrepreneurial income decreased by two per cent. Entrepreneurial income diminished from agriculture and forestry, as also did imputed income from owner-occupied dwellings, whereas other items of entrepreneurial income increased. Direct taxes paid grew by five per cent, so taxation tightened up, largely due to the revised treatment of dividends in taxation.

Final consumption expenditure of households grew by 4.2 per cent in nominal terms, i.e. clearly more than their disposable income. The savings rate, that is, the proportion of savings relative to disposable income, turned negative and was -0.5 per cent. Households' fixed investments went up by over 13 per cent as construction of single-family houses continued to increase. The financial position of households showed a deficit of EUR 3.9 billion.

Households' indebtedness increased by as much as 10 percentage points, reaching an all-time record of 89.6 per cent. The indebtedness rate expresses the ratio between the end-of-year credit stock relative to annual disposable income.

Next revision in January 2007

National accounts data for 2004 and 2005 will next be revised at the end of January 2007. The data for 2004 will then become final.

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Last updated 13.7.2006