Home > Statistics > Annual national accounts > 2007 > Gross domestic product grew by 4.5 per cent in 2007

Gross domestic product grew by 4.5 per cent in 2007

According to Statistics Finland's revised preliminary data, the volume of Finland's GDP grew by 4.5 per cent last year. In February the growth was estimated to be 4.4 per cent. Last year GDP stood at EUR 180 billion.

The data published now are still preliminary and based on the information on last year's economic development available on 4 July 2008.

Largest growth in manufacturing

The volume of primary production grew by as much as 16.6 per cent from the year before. Thanks to good grain crop, value added in agriculture went up by nearly 30 per cent. In forestry, value added grew by 14 per cent due to record volume of market fellings.

In the processing industries value added went up by 8.3 per cent last year. In the metal industry value added grew by 14 per cent. Manufacture of electrical and electronic products accounted for 23 per cent, manufacture of metal products for 1.6 per cent and manufacture of machinery and equipment for over 14 per cent of this total growth. By contrast, value added contracted by nearly four per cent in the manufacture of transport equipment. Besides industrial production, especially the volume of produced services, such as merchanting services, grew in the electronics industry.

In the wood and paper industry value added grew by only 2.7 per cent. The volume of value added went up by nine per cent in the food industry and by six per cent in energy supply. Construction was also again brisk and the volume of its value added grew by seven per cent, the fastest rate for the entire 2000s.

In private services value added grew by 3.6 per cent last year and in public services by 0.3 per cent.

The rate of growth slowed down slightly in trade where value added increased by good three per cent. By contrast, hotel and restaurant activities grew by over five per cent, the fastest rate for many years. Value added in transport, storage and communications went up by good two per cent. Value added did grow by over three per cent in transport, but diminished by about 0.5 per cent in telecommunications.

The volume of value added in financial intermediation and insurance activities grew by just short of two per cent. Real estate and business activities grew steadily by just under three per cent. Business activities grew at their fastest rate for many years, or by good six per cent, with labour hire activities and computer and related activities showing clearly the largest growth. Value added in public administration remained at its previous level. In education, health and social work value added grew by just short of one per cent. Other community, social and personal services grew by under five per cent.

Export and investments supported growth

All demand items in the national economy went up last year. The volume of investments went up by 8.5 per cent, the fastest rate in the 2000s. Consumption grew at a steady pace of just under three per cent. The volume of exports went up by over eight per cent. The volume of imports grew by just short of seven per cent.

Final consumption expenditure of households grew by good three per cent. Purchases of entertainment electronics and clothing, and expenditure on health increased most. The volume of government consumption expenditure increased by good one per cent.

Of all investments, those in premises grew by most, or by 22 per cent. Investments in machinery and equipment grew by nearly 11 per cent in volume, whereas those in residential buildings remained on level with the previous year. The investment rate of the national economy rose to 20.3 per cent, its highest level since 1991. Inventories grew by more than usual last year.

The volume of goods export grew by 6.5 per cent and that of service exports by 16 per cent. The combined volume of goods and services import went up by approximately 6.5 per cent. The surplus in the balance of goods and services grew to over EUR 9 billion.

Improvement in employment

According to national accounts, the number of employed persons went up by good two per cent last year. Jobs increased most in business activities, construction and trade.

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 rate of employment was 69.9 per cent, as against 68.9 per cent in the year before.

The productivity of labour of market producers (primarily private sector) increased last year by 3.7 per cent according to value added and by 5.7 per cent according to output. The productivity of labour grew by 2.5 per cent in the total economy.

Rise in prices accelerated

The economy's overall price level is estimated to have risen by 2.9 per cent last year as measured by the GDP price index. It was pushed up especially by prices of primary production, metals and construction.

The year-on-year rise in the consumer price index was 2.5 per cent, but the rise in the price index of household consumption expenditure in national accounts was 2.2 per cent. In national accounts, the prices of housing services are measured with changes in market rents only, 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 insurance and financial intermediation services also deviate from each other.

The terms of trade weakened further by 1.4 per cent as import prices rose by two per cent but export prices by less than one per cent.

Share of wage and salary income fell

Net national income grew by 7.7 per cent in nominal terms last year, and stood at EUR 29,300 per capita. Finland's gross national income was slightly higher than gross domestic product last year, i.e. EUR 182 billion. 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 4.1 and 4.3 per cent, respectively.

Households' wage and salary income went up by nearly six per cent and employers' social insurance contributions by good five per cent. Compensations of employees increased by a total of 5.7 per cent and their share of the national income contracted to 55.3 per cent. The respective proportion in the previous year was 56.3 per cent. Property and entrepreneurial income increased by 13.6 per cent and their share of national income stood at 31 per cent. The respective proportion in the previous year was 29.4 per cent.

Non-financial corporations' profits grew clearly

Non-financial corporations' operating surplus, or operating profit, grew by 12 per cent in nominal terms from the previous year. Their entrepreneurial income grew by 25 per cent. Entrepreneurial income also takes into consideration property income and paid interest and corresponds roughly with profit before payment of taxes and dividends. Last year, entrepreneurial income was also increased by intra-group dividends. In nominal terms, non-financial corporations' profits were higher than ever before.

Non-financial corporations paid 23 per cent more direct taxes and 43 per cent more dividends than in the year before.

Non-financial corporations' fixed investments in Finland grew by 17 per cent last year especially due to the growth in building construction investments. In nominal terms, non-financial corporations' fixed investments were higher than ever before. Non-financial corporations' net lending, or financial position, showed a surplus of just short of EUR 7 billion, as against a EUR 8 billion in the previous year.

Financial corporations' commission income and interest margin (financial intermediation services indirectly measured) grew by a total of 13 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, most of which consisted of intra-group dividends paid to the rest of the world. The financial position of financial and insurance corporations showed a surplus of good EUR one billion.

General government surplus nearly EUR 10 billion

The financial position of central government improved significantly last year, and the surplus stood at EUR 3.8 billion. State revenues from indirect taxes grew by three per cent and those from direct taxes by 12 per cent. Revenue from corporate income tax grew in particular. Income transfers to local government (incl. repayments of value added tax) went up by just under five per cent but those to social security funds fell by two per cent.

In nominal terms central government's final consumption expenditure grew by three per cent and investments by two per cent.

The financial position of local government was nearly in balance, showing a deficit of just EUR 0.1 billion. Tax revenues received by municipalities grew by just short of eight per cent. In nominal terms final consumption expenditure increased by about 5.5 per cent and investments by just under eight per cent.

The financial surplus of employment pension funds was EUR 5.4 billion and that of other social security funds EUR 0.5 billion.

The total financial position, or net lending, of general government showed a surplus of EUR 9.6 billion, or 5.3 per cent of gross domestic product. The surplus was higher than ever in nominal terms, and relative to GDP the highest since 2000.

So-called EMU debt of general government contracted to 35.2 per cent of GDP. The proportion of public expenditure of GDP (excluding internal transfers) contracted to 47.3 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 per cent last year. Direct taxation tightened slightly but this was offset by lowered rates of indirect taxation and social security contributions. In the previous year the tax rate was 43.5 per cent.

Households' real income grew by 2.9 per cent

Households' disposable income increased last year by 5.2 per cent in nominal terms and by 2.9 per cent in real terms.

The biggest contribution to the growth in gross income came from the nearly six 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 about 2.5 per cent. Thanks to risen prices, good crop and record fellings, entrepreneurial income grew by as much as 47 per cent in agriculture and forestry. By contrast, imputed income from owner-occupied housing fell by 25 per cent due to risen interest expenditure. Other entrepreneurial income grew by three per cent. Entrepreneurial income went up by two per cent in total. Direct taxes paid by households increased by good six per cent.

In nominal terms, households' final consumption expenditure grew by 5.6 per cent. Consumption expenditure also exceeded disposable income, which resulted in a savings ratio, or savings relative to disposable income, of -2.8 per cent. In other words, households' regular income could not quite cover their consumption expenditure. Households' fixed investments went up by six per cent in nominal terms. The financial position of households showed a deficit of EUR 6.5 billion.

Households' indebtedness rate went up to approximately 103 per cent, or higher than ever before. The indebtedness rate expresses the ratio between the end-of-year credit stock and the same year's disposable income.

Next revision in January 2009

The data for 2007 will next be revised at the end of January 2009.

---

Last updated 10.7.2008