OECD Economic Surveys : Finland 1993.

111 Pages·6.365 MB·English

by  OECD

OECD
URVEY:
FINLAND
OECD
OCDE
1993
ECONOMIC
S
FINLAND
ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT
ORGANISATION FOR ECONOMIC
CO-OPERATION AND DEVELOPMENT
PursuanttoArticle 1 oftheConvention signedinParis on 14th
December 1960, and which cameintoforceon30th September 1961,
the Organisation for Economic Co-operation and Development
(OECD)shallpromotepoliciesdesigned:
to achieve the highest sustainable economic growth and
employment and a rising standard ofliving in Member
countries,whilemaintainingfinancialstability,andthusto
contributetothedevelopmentoftheworldeconomy;
to contribute to sound economic expansioninMemberas
well as non-membercountries intheprocess ofeconomic
development;and
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
internationalobligations.
The original Member countries of the OECD are Austria,
Belgium, Canada, Denmark, France, Germany, Greece, Iceland,
Ireland,Italy,Luxembourg,theNetherlands,Norway,Portugal, Spain,
Sweden, Switzerland, Turkey, the United Kingdom and the United
States. The following countries became Members subsequently
through accession at the dates indicated hereafter: Japan (28th April
1964), Finland (28th January 1969), Australia (7th June 1971) and
New Zealand (29th May 1973). The Commission ofthe European
Communities takes part in the work ofthe OECD (Article 13 ofthe
OECDConvention).
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©OECD1993
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Table of contents
Introduction 9
I. Recent economic developments 11
The prolonged recession and its domestic implications 11
The export recovery 20
The short-term outlook 27
II. Economic policies 30
Monetary and exchange rate management 30
Government response to the banking crisis 36
The fiscal stance 40
Progress in structural reform 45
III. Labour market institutions and policies 50
Main features of the Finnish labour market 51
Factors behind the recent surge in unemployment 61
Labour market policies: the scope for change 67
IV. Conclusions 73
Notes and references 78
Annex:
Chronology of main economic events and policy measures 81
Statistical annex 87
Tables
Text
1. Demand and supply 14
2. Households' disposable income and saving ratio 17
3. Contributions to increases in labour costs in manufacturing 19
4. Consumer price inflation during 1992 20
5. Export performance 23
6. Export prices 27
7. Short-term projections 28
8. Money growth 36
9. Profit and loss account of Finnish deposit banks 37
10. Banks' non-performing loans and credit losses at the end of 1992 37
11. Disbursements of public support to banks 1991-92 39
12. Number of deposit banks, branches and staff 40
13. General government budget 41
14. Initial budget proposal and outcome for the consolidated
central government 42
15. Local government finances 43
16. Labour force participation rates 53
17. Evolution of sectoral employment 54
18. Government employment as a percentage of total employment 55
19. Average working hours and part-time employment 55
20. Unemployment rates by age group 56
21. Unemployment rates by industry 57
22. Social policy ingredients of incomes agreements in Finland 59
23. Cyclicality of labour market components 60
24. Recent developments in labour force participation rates
by age group 62
25. Active and passive labour market policy measures, 1965-1990 68
Statistical annex
Selected background statistics 89
A. Supply and use of resources, current prices 90
B. Supply and use of resources, 1985 prices 91
C. Gross domestic product by industry of origin 92
D. General government account 93
E. Balance of payments 94
F. Labour market 95
G. Imports: prices, volumes and values by commodity group 96
H. Exports: prices, volumes and values by commodity group 97
I. Foreign trade by area 98
J. Prices and wages 99
K. Interest rates, money and credit 100
L. Production structure and performance indicators 101
M. Public sector 103
Diagrams
1. Output growth and unemployment 11
2. Export market growth - 1990-1992 12
3. Production in manufacturing and other sectors 14
4. Output losses by sector, 1990-1992 15
5. Capital stock and output in the business sector 16
6. Investment and capacity utilization in industry 18
7. Consumer prices 21
8. Relative unit labour costs in the manufacturing sector 22
9. Capital income share in the business sector 23
10. Structure of exports 25
11. External balances 26
12. Foreign exchange interventions and official reserves 31
13. Exchange rate and interest rate movements 32
14. Real interest rates 34
15. Indicators of credit behaviour 35
16. Gross public debt 44
17. Unemployment rates in Finland and the OECD area 50
18. The employment situation in Finland since 1970 52
19. Negotiated wages and wage drift in manufacturing 58
20. Cyclical sensitivity of the employed workforce 1977-1992 61
21. Relative wages in manufacturing 63
22. Beveridge curve
23. Migration between municipalities
24. Wage dispersion
25. Long-term unemployment
26. Public spending on labour market programmes in relation
to the unemployment rate
BASICSTATISTICSOFFINLAND
THELAND
Area(lOOOsq.km) 338 Populationinmajorcities,
ofwhich: 31.1Z1991:
CultivatedUnd 27 Helsinki 497542
Forests 187 Ejpoo 175670
Lakes 32 Tampere 173797
Turku 159403
THEPEOPLE
Totalpopulation(31.12.1992), Manpowerbyindustryin1991
tboiaandi 5056 (percentoftotal):
Peraq.kmoflandarea ISA Agricultureandforestry 12J
Pettbouaandinhabitant»(1992): Industryandconstruction 40.6
Lhrebirthi 133 Commerce 20J
Deatûi 9.8 Transportandcommunication 10.0
Netnaturalincreate 3.4 Services 16.4
NetIncreateatpopulation 5.4
PARLIAMENTANDGOVERNMENT
CompositionofParliament, Government,numberofministers
numberofaeata(1991): from:
CenterParty 55 CenterParty 8
SocialDemocraticParty 48 NationalCoalition(Conservatives) 6
NationalCoalition(Conservative*) 40 SwedishPeople'sParty 2
Left-Win»Alliance 19 ChristianLeague 1
SwedishPeople'sParty 12
GreenLeague 10 Total 17
ChristianLeague 8
RuralParty 7
LiberalParty 1
Total 200
PRODUCTION
GrossDomesticProduct1992 GrossDomesticProductbyIndustry
(Mkmillion) 525900 in1991(percentoftotal):
GDPperhead,USdollars,1992 25141 Agricultureandforestry 6.7
Grossfixedcapitalformation Industryandconstruction 38.0
1992(Mkmillion) 92078 Commerce 133
Transportandcommunicatioo 10.5
Otherservices 31.4
PUBLICSECTOR
Publicconsumption1992, Generalgovernmentrevenueand
percentofGDP 24.9 expenditure,1992(Mkmillion)
Grossfixedcapitalformation Currentrevenue 209703
1992,percentofGDP: Currentexpenditure 244676
Generalgovernment 3.0 ofwhich:
Consumption 122205
Transfers 93020
Subsidies 17191
Interestonpublicdebt 12260
FOREIGNTRADE
Exportsofgoodsandservices, Importsofgoodsandservices,
percentofGDP,1992 25.9 percentofGDP,1992 24.7
Mainexportsin1991(percentoftotal): MainImportsin1991(percentoftotal):
Agriculturalproducts 1.1 Rawmaterials 55.6
Woodproducts 7.5 Fuelsandlubricants 3.6
Pulpandpaper 32.0 Investmentgoods 15.9
Metalandengines 31.4 Consumergoods 24.2
Othergoods 27.9
THECURRENCY
Monetaryunit:Markka CurrencyunitsperUSS,averageof
dairyfigures:
Year1992 4.49
June1993 5.56
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study
preparedforthe annual reviewofFinlandby the Economic
andDevelopmentReview Committeeon 17June 1993.
m
After revisions in the light ofdiscussions during the
review, final approval ofthe Surveyforpublication was
givenbythe Committeeon 13August1993.
The previous Survey ofFinland was issued in August
J992.
Introduction
Real output, which had declined by 6.5 per cent in 1991, fell again by
3.5 per cent in 1992, thus prolonging the worst recession experienced by Finland
in post-war history. Domestic demand contracted as falling real incomes and
over-capacity in thebusiness sectorreducedprivate consumption and investment.
This was partly offset by a strong revival of exports: the substantial increase in
Finland's international competitiveness, resulting from the 25 per cent deprecia¬
tion of the markka (against the ecu) since November 1991 and from wage
moderation, allowed exporters to regain shares on western markets, thereby
compensating for the collapse of sales to the former Soviet Union. As a result,
given the weak demand for imports, the trade balance increased markedly,
leading to some improvement of the current account position. The sharp fall in
activity was reflected in a dramatic surge in the unemployment rate, which
reached ahistoricalhigh of 18 percentin early 1993. Duetothegrowing slackin
the labour market, inflation pressures have remained low despite the depreciation
of the currency.
Current indicators suggest that export growth might accelerate, as competi¬
tiveness gains should be preserved by a second year ofno increase in negotiated
wages as well as by falling domestic raw material prices in the forestry industry,
which is Finland's main source of exports. Consequently, although domestic
demand should remain subdued, a gradual economic recovery is expected during
1993-94. But, as the increase in employment in the booming export sector
- which is capital intensive - will not be sufficient to compensate for furtherjob
losses in the sectors servicing the domestic market, unemployment is likely to
remain high for some time.
In response to the weakness of activity, monetary conditions were allowed
to ease progressively following the floating ofthe markka in 1992, the tightening
of fiscal policies and the moderate wage settlements for 1993. This movement