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Gross domestic product still grew by one per cent last year

According to Statistics Finland’s revised preliminary data, Finland’s GDP grew by 1.0 per cent last year. The initial preliminary data released in February put the growth at 0.9 per cent. Gross domestic product, or the value added created in the production of goods and services amounted to EUR 185 billion last year.

Output by industry

In primary production, the volume of value added grew by 0.3 per cent. Value added in agriculture contracted by one-and-a-half per cent. Output diminished in crop production but remained at its former level in livestock production. In forestry, value added grew by one per cent. Fellings diminished significantly but the net increment of forests was respectively greater than in previous years.

The volume of value added in secondary production, that is manufacturing and construction, grew by 0.1 per cent. In all manufacturing value added was also 0.1 per cent higher than one year earlier. In the wood and paper industry value added turned to a four per cent decline last year. In the metal industry value added increased by over five per cent thanks to the electronics industry’s growth of nearly 12 per cent. Value added in other manufacturing decreased by 8 per cent. In construction, the volume of value added grew by 0.3 per cent from one year back.

The volume of service industries grew by one-and-a-half per cent. Value added in trade went up by four per cent primarily thanks to the livened motor vehicle trade and to wholesale trade. In transport, value added increased by one-and-a-half per cent mainly due to growth in supporting and auxiliary transport activities. Real estate activities grew by over three per cent and business activities by just short of two per cent. The volume of value added in financial intermediation and insurance activities fell by 10 per cent. Public administration and educational services remained on level with the year before, but the volume of health and social work grew by one per cent.

Imports and exports grew clearly, consumption and investments less so

Foreign trade still grew clearly last year. In both imports and exports volume grew by approximately 7 per cent. The volume of goods exports increased by nearly three per cent and that of goods imports by over four per cent, but particularly large growth was recorded in foreign trade in services.

The volume of exports of services grew by 25 per cent and that of imports of services by 16 per cent. The figures became considerably revised upwards from the preliminary data released in February. The growth came especially from increased financial transactions of international groups and concentration of group activities into Finland from abroad.

Both private and public consumption expenditure grew by approximately two per cent in volume last year. Purchases of durable consumer goods showed the largest growth of approximately 9 per cent, whereas the consumption of non-durable consumer goods remained on level with the year before.

The volume of investments only grew by 0.3 last year. Investments in residential buildings, civil engineering investments and investments in software diminished clearly. By contrast, investments in business premises, and in machinery and equipment grew considerably last year.

Employment improved

The number of employed persons, as well as the number of hours worked, still grew by one-and-a-half per cent last year. Business activities, trade and construction showed the largest growth. According to Statistics Finland’s Labour Force Survey, the rate of unemployment was 6.4 per cent and the rate of employment 70.6 per cent.

The productivity of labour decreased by 0.3 per cent in the total economy.

Prices rose moderately

The economy’s overall price level is estimated to have risen by 1.8 per cent last year as measured by the GDP price index. It was pushed up especially by construction costs.

The year-on-year rise in the Consumer Price Index was 4.1 per cent, but the price index of household consumption expenditure in National Accounts stood at 3.3 per cent. In National Accounts, the prices of housing services are measured with changes in market rents only, whereas the Consumer Price Index also takes into consideration expenditure of owner-occupied housing. The methods used in National Accounts and in the Consumer Price Index for measuring development in the prices of insurance and financial intermediation services also deviate from each other.

The terms of trade weakened further by 3.3 per cent as import prices rose by nearly two per cent but export prices fell by one-and-a-half per cent.

National income contracted by 1.3 per cent in real terms

Net national income grew by 2.8 per cent in nominal terms last year, and stood at EUR 29,500 per capita. Finland’s gross national income was slightly lower than gross domestic product last year, i.e. EUR 185 billion, as the property income paid to the rest of the world exceeded property income received from the rest of the world. Due to the weakened terms of trade, gross and net national incomes contracted respectively by 0.9 and 1.1 per cent in real terms.

Households’ wage and salary income went up by 7.1 per cent and employers’ social insurance contributions by 5.5 per cent. Compensations of employees increased by a total of 6.8 per cent and their share of the national income rose to 58.4 per cent. The respective proportion in the previous year was 56.2 per cent. Property and entrepreneurial income decreased by 4.2 per cent and their share of the national income stood at 28.0 per cent. The respective proportion in the previous year was 30.0 per cent.

Non-financial corporations’ profits diminished

Non-financial corporations’ operating surplus, or operating profit, contracted by 7 per cent in nominal terms from the previous year. Their entrepreneurial income diminished by 12 per cent. Entrepreneurial income also takes into consideration property income and paid interest and corresponds roughly with profit before payment of taxes and dividends.

Non-financial corporations paid seven per cent less direct taxes and six per cent less dividends than in the year before.

Non-financial corporations’ fixed investments in Finland grew by 9 per cent in nominal terms last year, especially due to the growth in construction investments. Fixed investments were higher than ever before. Non-financial corporations’ net lending, or financial position, showed a surplus of just under of EUR one billion, while the surplus in the previous year was EUR four billion.

Financial corporations’ commission income fell by three per cent but interest margin (financial intermediation services indirectly measured) grew by 10 per cent from the year before. The credit and deposit stock continued to grow and the average annual level of interest rates was higher than in the previous year. The financial position of insurance and financial corporations showed as surplus of good EUR one billion.

General government surplus still exceeded EUR 8 billion

The financial position of central government still showed a surplus of EUR 1.6 billion last year. State revenues from indirect taxes grew by two per cent but one-and-a-half per cent less than in the previous year was accrued from direct taxes due to fallen corporate tax revenues. Income transfers to local government (incl. repayments of value added tax) increased by 10 per cent and those to social security funds by 7 per cent.

In nominal terms, central government’s final consumption expenditure grew by nearly 8 per cent and investments by approximately 11 per cent.

The financial position of local government was nearly in balance, showing a deficit of EUR 0.4 billion. Tax revenues received by municipalities grew by over six per cent. In nominal terms, final consumption expenditure grew by 7 per cent and investments by almost 12 per cent.

The financial surplus of employment pension funds rose to a new record amount of nearly EUR 7 billion last year, thanks to the collected employment pension contributions.

The total financial position, or net lending, of general government was EUR 8.1 billion in surplus. The EMU surplus deviates slightly from the general government net lending of National Accounts, and it stood at EUR 8.2 billion, or 4.5 per cent of GDP. The surplus was slightly smaller than in the previous year when it amounted to 5.2 per cent of GDP. General government’s so-called EMU debt contracted to 34.2 per cent of GDP.

The proportion of public expenditure of GDP (excluding internal transfers) went up to 49 per cent. In the previous year the ratio was 47.3 per cent.

The tax ratio, or the proportion of taxes and statutory social security contributions of GDP, rose to 43.1 per cent last year. In the previous year the tax ratio was 43 per cent.

Households’ real income grew by two per cent

Households’ disposable income grew again last year, in nominal terms by 5.4 per cent and per cent and in real terms by two per cent.

The biggest contribution to the growth in gross income came from nearly 7 per cent growth in the wage sum, which was due above all to risen level of earnings, although employment also improved compared to the year before. Social security benefits received by households went up by just under five per cent. Entrepreneurial income from agriculture and forestry fell by 14 per cent, and imputed income from owner-occupied housing by 20 per cent due to risen interest expenditure. Other entrepreneurial income diminished by half-a-per cent. Entrepreneurial income diminished by nearly 10 per cent in total. Direct taxes paid by households increased by good five per cent.

In nominal terms, households’ final consumption expenditure increased by 5.3 per cent. Consumption expenditure exceeded disposable income, which resulted in a savings ratio, or savings relative to disposable income, of -1.4 per cent. In other words, households’ regular income could not quite cover their consumption expenditure. Households’ fixed investments decreased by four per cent in nominal terms as investments in housing diminished. The financial position of households showed a deficit of nearly EUR five billion.

Households’ indebtedness rate was 104 per cent, or higher than ever before. The indebtedness rate expresses the ratio between the end-of-year credit stock and annual disposable income.

Next revision in January 2010

National Accounts data concerning 2008 will next be revised in January 2010, when the entire time series starting from 1975 will also be revised.

These revised preliminary data are based on the information on economic development that was available on 3 July 2009.

Methodological descriptions of National Accounts can be found on Statistics Finland’s website at: http://tilastokeskus.fi/til/vtp/men_en.html .

Source: National Accounts 1999–2008. Statistics Finland

Inquiries: Olli Savela (09) 1734 3316, Aila Heinonen (09) 1734 3338

Director in charge: Ari Tyrkkö

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Updated 9.7.2009