Gross domestic product in decline, Finland is in recession

According to Statistics Finland's preliminary data, the volume of Finland's gross domestic product diminished by 1.3 per cent in the last quarter of 2008 from the previous quarter. The growth slowed down already in early 2008 and in the third quarter output diminished by 0.3 per cent from the previous quarter. If recession is defined as a decline in output lasting for at least six successive months, Finland's economy can be considered as being in recession.

Changes in volume of GDP from previous quarter 1/2004-4/2008, %

In the whole of last year the volume of GDP grew by 0.9 per cent year-on-year. Gross domestic product, or the totalled up value added of the goods and services produced amounted to EUR 186 billion last year.

Demand in the national economy diminished in the last quarter: private consumption decreased by 1.2 per cent and investments by 2.1 per cent from twelve months back. Exports and imports contracted exceptionally strongly, by over 14 per cent. Only the volume of government consumption expenditure increased in the last quarter.

In the whole year, the volume of consumption grew by 1.9 per cent and investments by one per cent from the year before. By contrast, the volume of exports decreased by 1.1 per cent and that of imports by 1.3 per cent.

Output decreased in almost all industries in the last quarter

In manufacturing value added decreased by 5.3 per cent year-on-year in the last quarter but still grew by 0.3 per cent over the whole year. In construction output diminished by 3 per cent in the last quarter but still remained on level with the previous year over the whole year.

In services value added contracted by 0.7 per cent year-on-year in the last quarter but grew by 1.5 per cent in the whole year. Value added diminished especially in trade and transport in the last quarter. In primary production value added fell by 9.6 per cent in the last quarter from one year back and by 9 per cent over the whole year, mainly due to reduced fellings.

Non-financial corporations' profits diminished

Non-financial corporations' operating surplus contracted by 2 per cent year-on-year last year and their entrepreneurial income diminished by 15 per cent. Entrepreneurial income roughly corresponds with profit before payment of taxes and dividends.

Non-financial corporations paid 6 per cent less direct taxes and 20 per cent less dividends than in the previous year. Non-financial corporations' fixed investments in Finland grew by 10 per cent in nominal terms last year, especially due to growth in construction investments.

Households' real income grew by 2.7 per cent

Households' disposable income grew last year by 6.3 per cent in nominal terms and by 2.7 per cent in real terms. Households' wage and salary income went up by 7.1 per cent, property and entrepreneurial income by 3.6 per cent and social security benefits by 3.8 per cent. Direct taxes paid amounted to 5.2 per cent more than in the year before.

In nominal terms, households' final consumption expenditure increased by 5.6 per cent. Regular income was not enough to cover consumption expenditure, which resulted in a savings ratio, or savings relative to disposable income, of -0.9 per cent. Households' fixed investments decreased by good one per cent in nominal terms as investments in housing fell.

General government surplus still nearly EUR 8 billion

The financial position of central government still showed a surplus of EUR 1.5 billion last year. State revenues from taxes went up by only one per cent. Final consumption expenditure went up by over 7 per cent in nominal terms and income transfers by nearly 9 per cent. The financial position of local government was nearly in balance, showing a deficit of just EUR 0.2 billion. Municipalities' tax revenues grew by over 6 per cent and final consumption expenditure in nominal terms by 7 per cent. The financial surplus of employment pension funds was EUR 6 billion.

General government's EMU surplus contracted to 4.2 per cent of GDP having been 5.2 per cent in the previous year. The EMU debt decreased to 33.4 per cent of GDP.

The proportion of public expenditure of GDP grew from the previous year's 47.3 per cent to 48.4 per cent. The tax rate, or the proportion of taxes and statutory social security contributions of GDP, contracted to 42.7 per cent last year. In 2007 the tax rate was 43 per cent.

Source: National Accounts, Preliminary annual data and 4th quarter of 2008. Statistics Finland
General government deficit and gross debt according to EMU criteria. Statistics Finland

Inquiries:
National Accounts: Mr Pasi Koikkalainen +358 9 1734 3332, Mr Olli Savela +358 9 1734 3316, skt.95@stat.fi
General government deficit and debt: Mr Mika Sainio +358 9 1734 2686, Ms Marika Männistö +358 9 1734 2324, rahoitus.tilinpito@stat.fi

Director in charge: Mr Ari Tyrkkö