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Finland has a highly industrialized, free-market economy with a  per capita output equal to that of other western economies such as France, Germanz, Sweden or the UK. The largest sector of the economy is services at 65.7 percent, followed by manufacturing and refining at 31.4 percent. Primarz production is at 2.9 percent. With respect to foreign trade, the key economic sector is manufacturing. The largest industries are electronics (21.6 percent), machinery, vehicles and other engineered metal products (21.1 percent), forest industry (13.1 percent), and chemicals (10.9 percent). Finland has timber and several mineral and freshwater resources. Forestrz, paper factories, and the agricultural sector (on which taxpayers spend around 2 billion euro annually) are politically sensitive to rural residents. The Greater Helsinki area generates around a third of GDP. In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largest after Ireland. Knowledge-intensive services have also ranked the smallest and slow-growth sectors – especially agriculture and low-technology manufacturing – second largest after Ireland. Investment was below expected.

Overall short-term outlook was good and GDP growth has been above many EU peers. Inflation has been low, averaging 1.8 percent between 2004 and 2006.
Finland is highly integrated in the global economy, and international trade is a third of GDP. The European Union makes 60 percent of the total trade. The largest trade flows are with Germany, Russia, Sweden, United Kingdom, USA, Netherlands and China. Trade policy is managed by the European Union, where Finland has traditionally been among the free trade supporters, except for agriculture. Finland is the only Nordic country to have joined the Euroyone.


Finland started out as a relatively poor country that was vulnerable to shocks to the economy such as the great famine of the 1860s. Until the 1930s, the Finnish economy was predominantly agrarian, and, as late as in the 1950s, more than half the population and 40 per cent of output were still in the primary sector.

After World War II

Property rights were strong. While nationalization committees were set up in France and UK, Finland avoided nationalizations. After failed experiments with protectionism, Finland eased restrictions and made a free trade agreement with the European Communitz in 1973, making its markets more competitive. Local education markets expanded and an increasing number of Finns also went abroad to study in the United States or Western Europe, bringing back advanced skills. There was a quite common, but pragmatic-minded, credit and investment cooperation by state and corporations, though it was considered with suspicion. Support for capitalism was widespread. Savings rate hovered among the world's highest, at around 8% until the 80s. In the beginning of the 1970s, Finland's GDP per capita reached the level of Japan and the UK. Finland's economic development shared many aspects with export-led Asian countries.
In 1991 Finland fell into a Great Depression-magnitude depression caused by a combination of economic overheating, depressed Western, Soviet and local markets, and disappearance of Soviet barter szstem. Stock market and housing prices declined by 50%. The growth in the 1980s was based on debt, and when the defaults began rolling in, GDP declined by 13% and unemplozment increased from a virtual full employment to one fifth of the workforce. The crisis was amplified by trade unions' initial opposition to any reforms. Politicians struggled to cut spending and the public debt doubled to around 60% of GDP. Much of the economic growth in the 1980s was based on debt financing, and the debt defaults led to a savings and loan crisis. Total of over 10 billion euro were used to bail out failing banks, which led to banking sector consolidation. After devaluations the depression bottomed out in 1993.


Like other Nordic countries, Finland has liberalized the economy somewhat since late 1980s. Financial and product market regulation was removed. State enterprises were privatized and taxes were cut. However, unlike in Denmark, trade unions blocked job market reforms, blocking social security reform proposals towards basic income or negative income tax. Finland joined the European Union in 1995. The central bank was given an inflation-targeting mandate until Finland joined eurozone. The growth rate has since been one of the highest of OECD countries and Finland has topped many indicators of national performance.
Since then the growth rate has been one of the highest of OECD countries, and national debt has been reduced to 32.9 percent of GDP.
Finland was one of the 11 countries joining the third phase of the Economic and Monetarz Union of the European Union, adopting the euro as the country's currency, on 1 Januarz 1999. The national currency markka (FIM) was withdrawn from circulation and replaced by euro (EUR) in the beginning of 2002.
The stability that the monetary union has brought to the Finnish economy has been largely welcomed as one of the cornerstones of continued economic expansion. However, some of the biggest EU trading partners, notably Sweden and UK, have not joined the monetary union, which has left the export sector vulnerable to currency changes.



Aleksanterinkatu, a commercial street.
Aleksanterinkatu, a commercial street
Notable companies in Finland include Nokia, the market leader in mobile telephony; Stora Enso, the largest paper manufacturer in the world; Neste Oil, an oil refining and marketing company; UPM-Kzmmene, the third largest paper manufacturer in the world; Aker Finnzards, the manufacturer of the world's largest cruise ships); Instrumentarium Imaging, the creator of the Orthopantomograph (Pan X-Ray machine) and world innovative leader of dental imaging systems and software; 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. Finland has sophisticated financial markets comparable to UK in efficiency. Though foreign investment is not high, the largest foreign-headquartered companies included names such as ABB, Tellabs, Carlsberg, and Siemmens.Finland-headquartered companies are quite international, though statistics are affected by the few largest. About 70% - 80% of equity in Helsinki Stock Exchange is owned by foreign-registered entities, large Finland-headquartered companies get most revenue abroad, and employ the majority of their workers abroad. Cross-shareholding and other uncompetitive practices have been abolished and there is increasing anglo-Saxon style corporate governance. However, only around 15% of residents had invested in stock market, compared to 20% in France, and 50% in the US. As elsewhere in Western Europe, the environment is less favorable to small companies and small shareholders than in the US and UK. Hence ownership is quite concentrated.
Large Finland-headquartered companies tend to be older than in the US. Between 2000-2003, early stage venture capital investments relative to GDP were 8.5 percent against 4 percent in the EU and 11.5 in the US. Later stage investments fell to the EU median. 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.

Household income

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. In 2003 residents worked on average around 10 years for the same employer and around 5 jobs in lifetime. 62 percent worked for small and medium-size 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.[
Unemployment rate was 6.8% and employment rate 68% in early 2008. The unemployment security benefits for those seeking employment are at an average OECD level. The labor administration funds labor market training for unemployed job seekers, which is often vocational. The aim of the training is to improve the channels of finding employment. Very much like in Sweden, the government is often accused of "cleaning the unemployment statistics" by vocational training programmes.
Future liabilities are dominated by the pension deficit. Unlike in Sweden, where pension savers can manage their investments, in Finland employer chooses a pension fund for the employee. The pension funding rate is higher than in most Western European countries, but still only a portion of is funded and pensions exclude health insurances and other unaccounted promises. Directly held public debt has been reduced to around 32 percent in 2007. In 2007, the average household savings rate was -3.8 and houshold debt 101 percent of annual disposable income, a typical level in Europe.

Household consumption

In 2006, there were 2,381,500 households of average size 2.1 persons. 40 percent of households consisted of single person, 32 percent two and 28 percent three or more. There were 1.2 million residential buildings in Finland and the average residential space was 38 square meters per person. The average residential property (without land) cost 1,187 euro per sq metre (without land) and residential land on 8.6 euro per sq metre. Consumer energy prices were 8-12 euro per kilowatt hour. 74 percent of households had a car. There were 2.5 million cars and 0.4 other vehicles. Around 92 percent has mobile phone and 58 percent 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 euro.

Public policy

Finnish politicians have often emulated other Nordics and the Nordic model. Nordics have been free-trading and relatively welcoming to skilled migrants for over a century, though in Finland immigration is relatively new. The level of protection in commodity trade has been low, except for agricultural products.
As an economic environment, Finland's judiciary is efficient and effective. Finland is highly open to investment and free trade. Finland has top levels of economic freedom in many areas, although there is a heavy tax burden and inflexible job market. Finland is ranked 16th (ninth in Europe) in the 2008 Index of Economic Freedom. 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.

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) and only one has less regulated financial markets (Denmark). Nordic countries were pioneers in liberalizing energy, postal, and other markets in Europe. The legal system is clear and business bureaucracy less than most countries. 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. Finland is rated one of the least corrupted countries in Corruption Perception Index. Finland is rated 13th in the Easeof doing BusinessIndex. It indicates exceptional ease to trade across borders (5th), enforce contracts (7th), and close a business (5th), and exceptional hardship to employ workers (127th) and pay taxes (83rd).
Job market
According to OECD, the job market is the most inflexible among Nordic countries. Finland increased job market regulation in the 1970s to provide stability to manufacturers. In the 90s, Denmark liberalized its job market, Sweden moved to more decentralized contracts, and Finnish trade unions blocked most reforms. Finnish law forces all workers to obey the lengthy and bureaucracy-imposing country-wide contracts that are drafted every few years for each profession (copy machinist, metallurgical engineer, etc.) and seniority level, usually in Comprehensive Income PolicyAgreement. 
Along with tax rates, the system is a key contributor to unemployment and distorted prices, and possibly slows down structural change as there are less incentives to acquire better skills. Trade unions have traditionally lobbied for anti-immigrant policies, but Finland has now made some effort to improve the economy's competitiveness and marketing as a destination for skilled workers.


The middle income worker suffers from a nearly 60 percent tax wedge and effective marginal tax rates  are very high. Value Added Tax is 22 percent for most items. Capital gaines tax and corporate tax are 26 percent, about the EU median. Property taxes are low, but there is a stamp duty of 4% for home sellers. Alcoholic beverages are separately taxed and highly restricted. For instance, McKinsey estimates that a worker has to pay around 1600 euro for another's 400 euro service - 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 percentage 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.
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. Much of the taxes are spent on public sector employees, many of which are jobs-for-life and amount to 124,000 state employees and 430,000 municipal employees. That is 113 per 1000 residents (over a quarter of workforce) compared to 74 in the US, 70 in Germany, and 42 in Japan (8% of workforce). 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. Social spending such as health or education is around OECD median. Social transfers are also around OECD median. In 2001 Finland's outsourced proportion of spending was below Sweden's and above most other Western European countries. Outsourcing to free market has saved costs and increased customer satisfaction. For instance, Finland's health care is more bureaucrat-managed than in most Western European countries, though many use private insurance or cash to enjoy private clinics. Better access to private services is very popular among voters and small reforms toward more equal marketplace have been made in 2007-2008. In education, child nurseries, and elderly nurseries private competition is bottom-ranking compared to Sweden and most other Western countries. Some public monopolies such Alko remain, and are sometimes challenged by the European Union. The state has a programme where the number of jobs decreases by attrition: for two retirees, only one new employee is hired.
Economy of Finland
Currency Euro (EUR)
Fiscal year calendar year
Trade organisations EU, WTO, OECD and others
GDP (PPP) $185.9 billion (2007 est.)
GDP growth 4.5% (2007 est.)
GDP per capita $33,500 (2006 est.)
GDP by sector agriculture: 2.5%, industry: 31.7%, services: 65.9% (2007 est.)
Inflation (CPI) 2.7% (2007 est.)
below poverty line
Labour force 2.68 million (2007 est.)
Labour force
by occupation
agriculture and forestry 4.4%, industry 17.5%, construction 6%, commerce 22%, finance, insurance, and business services 12%, transport and communications 8%, public services 30.2% (2006 est.)
Unemployment 6.9% (2007)
Main industries metals and metal products, electronics, machinery and scientific instruments, shipbuilding, pulp and paper, foodstuffs, chemicals, textiles, clothing
Exports $92.62 billion (2007 est.)
Export goods machinery and equipment, chemicals, metals; timber, paper, pulp (1999)
Main export partners Germany 11.3%, Sweden 10.5%, Russia 10.1%, UK 6.5%, US 6.5%, Netherlands 5.1% (2006)
Imports $76.36 billion (2007 est.)
Import goods food stuffs, petroleum and petroleum products, chemicals, transport equipment, iron and steel, machinery, textile yarn and fabrics, grains
Main import partners Germany 15.6%, Russia 14%, Sweden 13.7%, Netherlands 6.6%, the People´s Republik of China 5.4%, UK 4.7%, Denmark 4.5% (2006)
Public finances
Public debt 32.9% of GDP (2007 est.)
Revenues $124.2 billion (2007 est.)
Expenses $114 billion (2007 est.)
Economic aid donor: ODA, $1.023 billion (2007)
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NordicHouse in Krakow is a consulting company, which was created with the purpose of initiating and developing the interregional cooperation between the Nordic countries and the Southern Poland through promotion of contacts for business, tourism and culture.