Home > Statistics > Quarterly national accounts > 2007 > 4th quarter > Gross domestic product grew by 4.4 per cent

Gross domestic product grew by 4.4 per cent

According to Statistics Finland's preliminary data, the volume of Finland's GDP grew by 4.4 per cent in 2007. Last year GDP stood at EUR 179 billion. Finland's GDP growth was faster than that of the EU countries on the average. The average GDP growth in the EU countries was 2.9 per cent.

In the last quarter of the year GDP grew by 0.9 per cent from the previous quarter. Compared to the corresponding time period of the previous year the growth amounted to 3.7 per cent.

These preliminary data are based on information available on 20 February 2008 on the economic development during last year.

Strong growth in agriculture, forestry and the metal industry

The volume of GDP grew by 4.4 per cent in 2007. Growth was faster in the first half of the year; during the 1st and 2nd quarters GDP grew at a rate exceeding 5 per cent when compared with the previous year. In the second half of 2007 the growth rate slowed down slightly so that growth in the 3rd quarter stood at 3.6 per cent and that of the 4th quarter at 3.7 per cent when compared with one year previously. Compared with the previous quarter, the volume of GDP grew by 1.3 per cent in the 1st quarter, by 1.0 per cent in the 2nd, by 0.5 per cent in the 3rd and by 0.9 per cent in the 4th quarter.

The volume of primary production grew by 16.9 per cent from the year before. Thanks to the second best grain crop ever, value added in agriculture went up by nearly 30 per cent. In forestry, the value added grew by 14 per cent, which reflects the significant increase in market fellings from the year before.

The value added in processing industries grew by 5.8 per cent from the previous year. Value added in the metal industry (incl. electronics industry) was up by over 10 per cent year-on-year and the growth was the most vigorous in the 1st quarter (at 12 per cent). In the wood and paper industry value added was 0.3 per cent lower than one year previously. The volume was still growing in the first half of the year, but especially in the last quarter the development of the value added in the wood and paper industry was weak and the volume fell by over 7 per cent. Value added in other manufacturing grew by 2.5 per cent; the last quarter was the weakest here as well and the volume fell by 0.4 per cent from the year before.

Construction showed strong growth in 2007. The volume of value added in building construction grew by 7.9 per cent, and civil engineering construction grew by 6.3 per cent from the year before.

In the service industries, the volume of value added went up by 3.5 per cent last year. The value added generated in trade grew by 5.1 per cent with wholesale trade and retail trade showing increases of 4.7 and 5.8 per cent, respectively. Motor vehicle sales grew by 5.1 per cent from one year previously, though the volume fell by slightly under 5 per cent in the last quarter due to anticipation of the vehicle tax revision at the turn of the year. Hotel and restaurant activities' volume increased by 3.4 per cent.

Transport, storage and telecommunications grew by 2.6 per cent. The moderate growth per cent was affected by the fact that the volume of telecommunications stayed at last year's level. Transport, by contrast, showed clear growth from the year before. Real estate and business activities grew by 5.7 per cent from the year before; if the ownership and letting of dwellings are excluded value added in the industry grew by 8.8 per cent. The volume of financial intermediation and insurance activities increased by slightly under one per cent. The volume of education, health and social work grew by some 2 per cent.

Investments increased demand

The volume of exports went up by 4.8 per cent in 2007. The export of goods grew by 5.1 per cent and that of services by 3.2 per cent. The volume of imports went up by 4.1 per cent; the growth of import of goods stood at 5 per cent and that of services at 0.5 per cent. Similarly to GDP, the export and import of goods grew faster in the first half of the year. Data on the imports and exports of services may become substantially revised.

The volume of private consumption expenditure went up by 3.7 per cent last year. Consumption of durable goods increased by 3.9 per cent. Development was weak in motor vehicle trade especially in the last quarter of 2007 after the vehicle tax revision was published, but trade in entertainment electronics was very lively. The consumption of semi-durable goods such as clothing, footwear, etc., grew by 7 per cent. The consumption of non-durable goods, such as electricity and fuels, grew by 4 per cent. Consumption of services went up by 2.9 per cent from the previous year.

The volume of government consumption expenditure increased by just under one per cent. Government investments increased by 3.4 per cent.

In the whole economy investments increased by 7.6 per cent, which is the largest growth in the volume of investments since 1998. Building construction investments increased by 8.1 per cent from the year before. The construction of office premises increased particularly strongly; the volume grew by as much as 20 per cent. Investments in housing construction increased by only one-half of a per cent when compared with the year before. The volume of investments in machinery, equipment and transport equipment grew by 6.2 per cent.

Rate of unemployment fell, hours worked increased

According to Statistics Finland's labour force statistics, the rate of unemployment was 6.9 per cent, having been 7.7 per cent in the year before. The average number of unemployed persons was 183,000 last year. The employment rate was 69.9 per cent, having been 68.9 per cent twelve months earlier. The number of employed persons went up by 2.2 per cent and that of hours worked by 1.3 per cent last year.

Rise in prices picked up speed, terms of trade weakened

The economy's overall price level is estimated to have risen by 2.5 per cent last year as measured by the GDP price index. The GDP price index was put up especially by risen prices of forestry and building construction. The GDP price index grew by 1.3 per cent in 2006; thus, the rate of increase in prices has sped up in 2007.

The year-on-year rise in the Consumer Price Index was 2.5 per cent and the price index of household consumption expenditure was 1.5 per cent up on the year before. In national accounts, the prices of housing services are measured with changes in market rents, whereas the Consumer Price Index also takes into consideration all expenditure of owner-occupied housing. The methods used in national accounts and in the Consumer Price Index for measuring development in the prices of financial intermediation and insurance services also deviate from each other.

The terms of trade weakened again as export prices rose by only 1.3 per cent while import prices rose by 2.6 per cent from the year before.

National income grew by 3.7 per cent in real terms

Net national income grew by 6.6 per cent in nominal terms last year, and stood at EUR 29,000 per capita. Last year Finland's gross national income was, at EUR 180 billion, slightly higher than GDP, as the property income received from the rest of the world exceeded property income paid to the rest of the world. Due to the weakened terms of trade, gross national income and net national income both grew by less than GDP in real terms, i.e. by 3.5 and 3.7 per cent, respectively.

Households' wages and salaries went up by 5.9 per cent and employers' social insurance contributions by 4.8 per cent. Compensations of employees increased by a total of 5.7 per cent but their share of national income contracted to 55.8 per cent. The respective share in the previous year was 56.3 per cent. Property and entrepreneurial income increased by 10 per cent and their share of national income stood at 30.4 per cent. The respective share in the previous year was 29.4 per cent.

Non-financial corporations' profits grew clearly

Non-financial corporations' operating surplus, or operating profit, grew in nominal terms by more than 13 per cent from the previous year. Their entrepreneurial income grew by 11 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' profits were higher than ever before.

In 2007 non-financial corporations paid 24 per cent more direct taxes and two per cent more dividends than in the year before.

Non-financial corporations' fixed investments in Finland grew by 16 per cent last year in nominal terms, especially due to the growth in building construction investments. Non-financial corporations' fixed investments were higher than ever before. Non-financial corporations' net lending, or financial position, showed a surplus of a good EUR 7 billion, as against a EUR 8 billion in the previous year.

Financial corporations' commission income and interest income (financial intermediation services indirectly measured) grew by a total of 11 per cent from the year before. The credit and deposit stock increased and the general level of interest rates rose. Financial corporations' paid out an exceptionally high volume of dividends in 2007, nearly EUR 6 billion, the major part of which consisted of intra-group dividends. The financial position of insurance and financial corporations showed a surplus of a good EUR one billion.

General government surplus over EUR 9 billion

Last year the financial position of central government improved significantly, and the surplus stood at EUR 3.6 billion. State revenues from indirect taxes grew by 3 per cent and those from direct taxes by 12 per cent. In particular, the revenue from corporate income tax grew. Income transfers to local government (incl. repayments of value added tax) went up by a good 4 per cent but those to social security funds fell by 2 per cent.

The nominal growth of central government's final consumption expenditure was 2 per cent and that of investments one per cent.

The financial position of local government was nearly on balance, the deficit amounted to just EUR 0.1 billion. Tax revenues received by municipalities grew by nearly 8 per cent. The nominal growth of local government's final consumption expenditure was 5 per cent and that of investments nearly 8 per cent.

The financial surplus of employment pension funds was EUR 5.3 billion and that of other social security funds EUR 0.6 billion.

The total financial position, or net lending, of general government showed a EUR 9.4 billion surplus. The EMU surplus deviates slightly from the concept of general government net lending used in national accounts, and stood at EUR 9.5 billion , or 5.3 per cent of GDP. The surplus was higher than ever in nominal terms, and relative to GDP it was the highest since 2000. General government's so-called EMU debt contracted to 35.4 per cent of GDP.

The proportion of public expenditure of GDP (excluding internal transfers) contracted to 47.5 per cent. The respective proportion in the previous year was 48.9 per cent.

The tax rate, or the proportion of taxes and statutory social security contributions of GDP, contracted to 43.1 per cent last year. The tax rate was 43.5 per cent in the year before.

Households' real income grew by a good 2 per cent

Households' disposable income increased last year by 4 per cent in nominal terms and by 2.4 per cent in real terms.

The biggest contribution to the growth in gross income came from the nearly 6 per cent growth in the wage sum, which was due to the risen level of earnings and improved employment. Social security benefits received by households went up by some 2.5 per cent. Entrepreneurial income from agriculture and forestry grew by 13 per cent, but the imputed dwelling income from owner-occupied dwellings decreased by 19 per cent due to risen interest expenditure. Other entrepreneurial income went up by 1.5 per cent. Total entrepreneurial income decreased by 3.5 per cent. Direct taxes paid by households increased by a good 6 per cent.

In nominal terms, the final consumption expenditure of households grew by 5.4 per cent. Consumption expenditure also exceeded disposable income, which resulted in a savings ratio, or savings relative to disposable income, of -3.8 per cent. In other words, households' regular income could not quite cover their consumption expenditure. Households' fixed investments went up by 9 per cent in nominal terms. Households' financial position showed a deficit of EUR 8 billion.

Households' indebtedness increased to 101.8 per cent at the end of September; for the first time it exceeded the annual disposable income. The indebtedness rate expresses the ratio between the credit stock and annual disposable income.

Next revision

Data at the annual level for 2007 will next be revised on 10 July 2008. The time series from 1975 will next be revised in 2009.

Data concerning the first quarter of 2008 will be released on 9 June 2008

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Last updated 29.2.2008