Press release 1.3.2010

Gross domestic product contracted by 7.8 per cent in 2009

According to Statistics Finland's preliminary data, the volume of Finland's GDP contracted by 7.8 per cent in 2009. The fall was the largest reduction in output for an individual year since 1917 and 1918. Gross domestic product, or the totalled up value added of the goods and services produced amounted to EUR 171 billion last year.

Output contracted most in the first quarter of the year, by 5.2 per cent from the previous quarter, and continued to fall by 0.3 per cent in the second quarter. In the third quarter output grew by 0.3 per cent from the previous quarter and in the fourth quarter remained on level with the previous quarter.

According to the preliminary data compiled by Eurostat, in the last quarter of 2009 GDP grew in the EU area by 0.1 per cent from the previous quarter but contracted by 2.3 per cent from twelve months back.

Changes in volume of GDP from previous quarter %

Demand was most diminished by the 24 per cent contraction in the volume of exports. Investments decreased by over 13 per cent and private consumption by 2.1 per cent. Public consumption grew by 0.7 per cent. Imports declined by 22 per cent and inventories diminished.

Demand grew in the last quarter

In the last quarter, the demand of the national economy increased slightly compared with the previous quarter. From October to December, the volume of exports grew by 7.4 per cent from the previous quarter, to which a large delivery of a cruise liner contributed. The volume of private consumption grew by 0.7 per cent and public consumption by 0.1 per cent from the previous quarter. The volume of investments went up by 2.7 per cent. Inventories diminished. The volume of imports grew by 0.7 per cent.

Value added in manufacturing increased by 1.4 per cent in the last quarter of the year from the previous quarter, mainly due to the metal industry. Against this, value added in construction decreased by 1.6 per cent. Value added in the service industries went down by 0.2 per cent. Growth occurred in trade and transport, for instance, where value added increased by 0.6 per cent.

In the whole of 2009 value added in manufacturing decreased by 20 per cent and in construction by 13 per cent. Value added in trade declined by 11 per cent and in transport by seven per cent.

Because the number of hours worked contracted less than output, the productivity of work in the whole national economy weakened by two per cent last year.

Non-financial corporations' profits diminished substantially

Non-financial corporations' entrepreneurial income diminished by as much as 44 per cent last year from the year before. Entrepreneurial income roughly corresponds with profit before payment of taxes and dividends. Non-financial corporations paid 44 per cent less direct taxes and 34 per cent less dividends than in the previous year.

Due to reduced investments and inventories, non-financial corporations' financial position showed a surplus of EUR 4.8 billion, while the financial position was nearly in balance in the previous year.

General government deficit 2.2 per cent of GDP

The financial position of central government turned sharply into a deficit last year. The deficit was EUR 8.6 billion, the biggest since 1995. State revenues from indirect taxes decreased by 4.4 per cent and those from direct taxes by as much as 31 per cent. Corporation tax revenue received by central government fell to under one half, but income taxes paid by households to central government also decreased by 21 per cent. In contrast, income transfers paid, to social security funds and municipalities, for instance, grew in all by 12 per cent.

The deficit of municipalities and joint municipal boards was EUR 0.7 billion, unchanged from the year before. Municipalities' tax revenues went up by half a per cent and final consumption expenditure by 2.6 per cent.

The financial surplus of employment pension funds fell to EUR 5.1 billion, because pensions paid increased. Revenue from pension contributions was unchanged from before and property income decreased.

In all, the EMU deficit of general government was 2.2 per cent of GDP. Government finance showed last a deficit in 1997. The EMU debt in relation to GDP grew in the year by nearly ten percentage points and was 44 per cent.

The proportion of public expenditure to GDP grew considerably to 55.6 per cent. In the previous year the proportion was 49.5 per cent. The tax rate, or the proportion of taxes and statutory social security contributions to GDP, contracted to 43 per cent last year.

Households' real income grew by one per cent

Despite the recession, households' disposable income grew again last year, in nominal terms by 1.9 per cent and in real terms by one per cent.

Wages and salaries went down by one per cent, but social security benefits grew and taxation became lighter. Growing unemployment diminished income from wages and salaries, because the income level rose by around four per cent. Social security benefits went up by 6.6 per cent, particularly pensions received grew. Households' property and entrepreneurial income lowered by 3.4 per cent.

Despite growth in income, households diminished their consumption by 1.2 per cent. Consumption expenditure was lower than disposable income, so the savings ratio, or savings relative to disposable income, became positive at 2.5 per cent. Regardless of this, households' indebtedness rose again and was 113.5 per cent.

Source: National accounts 2009 (preliminary data) and Quarterly national accounts 2009, 4th quarter. Statistics Finland
General government deficit and gross debt according to EMU criteria, 2009 (preliminary data). Statistics Finland
Taxes and tax-like payments 2009 (preliminary data). Statistics Finland

Inquiries:
National Accounts: Pasi Koikkalainen +358 9 1734 3332, Olli Savela +358 9 1734 3316,
skt.95@stat.fi
General government deficit and debt and taxes: Mika Sainio +358 9 1734 2686, Mira Kuussaari +358 9 1734 3538, rahoitus.tilinpito@stat.fi

Director in charge: Ari Tyrkkö


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