Political Economy

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Finnish economy would start looking for ways to rejuvenate since Nokia has finally moved on to the Americans

Tuesday, 03 September 2013
The Finnish economy was growing pretty well for the 10 years before the financial crisis. Since then, the country has struggled to navigate through the choppy waters created by the waves of the crisis and dealing with the pain of Nokia. When Nokia realised that it had lost the plot in the mobile communication, Finland received a strong blow and has never seen light again the same as before.

Finland's GDP grew by nearly 4 percent per year on average over the ten-year period 1998 and 2007. In 2008, the financial crisis hit and then, Finland stated struggling for strategies to grow. The struggle for strategy was compounded by the stresses also faced by the Finnish darling corporation, Nokia that also was a symbol of a modern Finland.

Nokia has been in the heart of the Finnish economy and had been the leader of innovation in the mobile industry where it was persistently ranked world No1. So being the leader of revolution as preached by Gary Hammel in "Leading the revolution," where  and how did Apple and Samsung come from and why was Nokia unable to react to such challenges from its competitors.

It look liked Nokia was too arrogant to feel that it even had a competitor. There was nothing in the company's strategy  to bat away such threats as, such it continued to sleep and was left behind by competitors in the development of smart phones.
Then the Finnish economy as well as the prime symbol of the modern Finland remain depressed and have not been able to fully recover from the blow.The Finnish Economy
From 2008 until today, the economy has instead fallen, also mostly because of the catastrophic 2009 financial melt down. GDP has declined over the last four quarters, calculated on an annual basis. The gloomy situation looks expected to grow to five when the data for the second quarter is presented on Thursday.

Besides the missed chances of Nokia, the Swedish business daily, Dagens industri identify that one important reason for this Finnish economic stress  has been caused by weak export market perfromances. "Export demand remains low because of the weak global economy, "said Pasi Sorjonen, an analyst at Nordea, to the paper earlier this summer.

The euro zone is the main outlet for their exports and as that side remain depressed, Russia has been coming as major export destination. However, that has not been enough. Another difference is that Finland is a member of the euro single currency. The Finnish export companies had therefore no cushion to protect themselves from the stresses observed when international demand fell sharply between 2008 and 2009.

International market has not been the only troubling headache for the Finland economy -  domestic market has also been depressed with weak demand.
"Wage increases have been eaten to a larger extent by higher taxes, at both national and local levels, and investments has also been  flat lining across the board. The weakness in the economy is broad-based, "said Pasi Sorjonen.
Despite that the financial crisis has also exposed a lot of structural problems, which previously were hidden, by for power of Nokia's unprecedented success.

"The problems in the Finnish economy consist of both sustainability in terms of the structural growth and public finances during the difficult economic times, " the government had said in a press release on the budget last week.

The government estimates that the economy will shrink by 0.5 percent for the full year in 2013 and that growth will be a modest 1.2 per cent next year.

The European Commission had observed weak competitiveness tied to significant regulatory barriers in the Finnish service sector, writes the Swedish paper.
"Market concentration is high in important sectors such as retail, "was the complaint and financial recommendation to Finland from the EU according the Dagens Industri.

The EU Commission also points to the weak development of productivity.
"Finland's production growth continues to lag behind wage growth, while the country's international competitiveness has declined."
One bright spot is government finances, which remain solid though the zero growth is beginning to eat into it.

"Public finances have been affected by the recent weak real economic development. (Budget) balance fell in 2012 to minus 2.3 per cent of GDP and the weak economy is taking away the positive balance reinforcing effects of the government's tightening policies. The shift towards more expansionary policies as observed in Sweden is absent in Finland and we expect a continued tightening policies, "said SEB in the new economic forecast published last week, writes the Swedish business daily Dagens Industri.
By Scancomark.com Team

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