Gross domestic product grew by 3.7 per cent

28.2.2005

According to Statistics Finland's preliminary data, the volume of Finland's GDP grew by 3.7 per cent in 2004, when it amounted to EUR 150 billion. The preliminary data are based on the information available on 18 February 2005 on economic development in 2004.

During the last quarter of 2004, GDP increased by 0.6 per cent from the previous quarter. Growth compared with the corresponding quarter of the previous year amounted to 4.0 per cent. There were three more working days in 2004 than in the year before.

Growth in processing and service industries

The volume of primary production contracted by two per cent from the previous year. Livestock production contracted slightly less than crop cultivation. Forestry declined by two per cent as the forest industry increased its use of wood from abroad.

In the processing industries, output went up by good four per cent from the previous year. In the metal industry, output picked up in spring and went up by seven per cent. Output in the electrical and electronics industry grew by 14 per cent. In the wood and paper industry, output was six per cent greater than in the year before. The output of products in other manufacturing increased by 1.5 per cent from the previous year.

Building construction increased by nearly two per cent. Construction of residential buildings went up last year, while other building construction contracted. Output in civil engineering grew by five per cent.

In the service industries, output increased by 3.5 per cent last year. Trade increased by six per cent. Wholesale trade grew by six per cent and retail trade by five per cent. The strong growth in the sales of motor vehicles of the past two years slowed down and the growth over the whole year amounted to barely eight per cent. Output increased by one per cent in hotel and restaurant activities. In transport and communications output went up by six per cent with the highest growth figures recorded in air transport, and in post and telecommunications. Financial intermediation and insurance activities increased by eight per cent.

During the first quarter of the year output was down by one per cent on the previous quarter but in the second quarter of the year GDP went up by 0.8 per cent and in the third quarter by 1.1 per cent. In the last quarter GDP increased by 0.6 per cent when compared with the previous quarter.

Households' consumption and private investments supported growth

Growth in demand hinged on households' consumption and private investments last year. Having contracted for the two previous years, fixed investment began to increase again. The volume of exports grew by 3.5 per cent and that of imports by just short of five per cent.

Private final consumption expenditure rose by over three per cent last year. Purchases of cars, which had continued brisk for two years, petered out in spring, but home appliances were bought in greater quantities that in the year before. Purchases of durable consumer goods went up by four per cent last year, whereas in the year before their purchases increased by as much as 19 per cent. The consumption of semi-durable goods increased by five per cent and that of services by three per cent. The growth in the consumption of non-durable goods was only two per cent, as use of heating energy decreased because the early part of the year was milder than in the year before.

Government consumption expenditure increased by two per cent, slightly more in local government than in central government. Government investments contracted by one per cent.

In the total economy, fixed investments increased by close on five per cent. Total investments in machinery, equipment and transport equipment grew by nearly ten per cent. Compared with the previous year, investments in residential buildings increased by eight per cent, but construction of other buildings fell by five per cent.

Employment increased slightly

According to Statistics Finland's labour force statistics, the rate of unemployment was 8.8 per cent, having been 9.0 per cent in the year before. The average number of unemployed persons last year was 229,000. The rate of employment was 67.2 per cent, against 67.3 per cent in the year before. Last year the number of employed persons went up by 0.1 per cent and the number of hours worked by 1.2 per cent.

Moderate rises in prices

The economy's overall price level is estimated to have risen by 0.8 per cent last year as measured by the GDP price index. Rise of the GDP price index was curbed in particular by decreases in the prices of the manufacturing industry.

The year-on-year rise in the consumer price index was 0.2 per cent, but the price index of households' final consumption expenditure was 0.8 per cent higher than in the year before. In national accounts, the price of housing services is measured by changes in rents, while the price of owner-occupied housing is also taken into account in the consumer price index.

The terms of trade weakened by 1.7 per cent, because export prices rose by one per cent, but import prices by nearly three per cent. Export and import prices in national accounts differ from Statistics Finland's export and import price indices because of the annual industry weight structure that is used in the calculations.

National income grow in real terms

Net national income grew by 5.8 per cent in nominal terms last year and was EUR 23,900 per capita. Finland's gross national income last year was EUR 149 billion. Gross national income grew by 3.8 per cent in real terms despite the weakened terms of trade.

Finnish households' wages and salaries grew by 4.5 per cent and employers' social contributions by 3.5 per cent. Compensations of employees increased altogether by good four per cent and their proportion of the national income was to 59,0 per cent, having been 59.8 per cent in the year before. Property and entrepreneurial income increased by eleven per cent and accounted for 25,8 per cent of the national income. In the year before their respective proportion was 24,7 per cent.

Non-financial corporations' operating surplus went up

The operating surplus of non-financial corporations went up by nearly eight per cent last year. The growth accelerated clearly from the past few years and was the fastest since 2000. In business bookkeeping, profit roughly corresponds with operating surplus. Entrepreneurial income also grew faster than in recent years, by 14 per cent.

Direct taxes paid by non-financial corporations decreased by nearly eight per cent from the previous year. Non-financial corporations paid 11 per cent more in dividends than in the year before.

The value of non-financial corporations' fixed investments went up by seven per cent last year. Despite the increased investments, their financial position remained good. Their net lending, depicting their financial position, amounted to approximately EUR seven billion and grew by 13 per cent from the previous year.

Financial corporations' financial position in deficit

The net interest income of financial corporations (financial intermediation services indirectly measured) was on little higher level compared with the previous year. The credit stock and deposit base grew but the interest level declined. The financial position of financial corporations was still in deficit. The reasons for this were paid dividends and the cease of growth in property income. The financial position of insurance corporations showed a slight deficit.

General government surplus nearly EUR three billion

Central government continued to show a slight surplus of EUR 0.2 billion last year. State revenues from indirect taxes increased by just under three cent, of which increase in value added tax revenues accounted for four per cent. Revenues from direct taxes grew by 4.3 per cent. Income transfers paid to local government grew by nearly eight per cent, those to social security funds by four per cent and to the rest of the world by six per cent.

Central government's consumption expenditure went up by five per cent in nominal terms and by 1.5 per cent in real terms. Central government's investments increased by 3 per cent in nominal terms.

The financial position of local government weakened and showed a deficit of around EUR 1 billion. The financial position showed a deficit for the fourth successive year. Consumption expenditure grew by six per cent in nominal terms and by good two per cent in real terms. The growth in tax revenues received by municipalities amounted to barely two per cent. In nominal terms, the increase in fixed investments remained at good one per cent.

No major changes took place in the financial position of social security funds. The financial position of employment pension schemes improved by two per cent but that of other social security funds weakened somewhat. The benefits paid grew by good three per cent and the social security contributions received by slightly more. The premium income of employment pension schemes went up by under four per cent and that of other social security funds by three per cent. The financial surplus of employment pension schemes was EUR 4 billion, while other social security funds showed a deficit of EUR 0.3 billion. The total surplus of social security funds was EUR 3.7 billion, or 2.4 per of GDP. In the year before, the respective proportion was 2.5 per cent.

The EMU surplus differs slightly from the net lending of general government used in national accounts, and was 2.1 per cent in 2004. The EMU debt amounted to 45.1 per cent of GDP.

Proportion of public expenditure of GDP

The proportion of public expenditure (excluding internal transfers) of GDP fell slightly, and was 50.7 per cent in 2004, as against 50.9 per cent in the previous year. The tax rate, or the proportion of taxes and statutory social security contributions of GDP, declined last year to 44.1 per cent from 44.8 per cent in 2003.

Households' real income grew by 4.6 per cent

In 2004, the disposable income of households increased by 5.4 per cent in nominal terms and by 4.6 per cent in real terms. Neither profits on sales nor incentive stock options are recorded as income in national accounts, but the taxes paid on such profits or options are included in taxes. Income from stock options is estimated to have amounted to EUR 184 million in 2004.

Gross income went up chiefly as a result of a 4.6 per cent growth in the wage sum. Property income grew by 11 per cent while property expenditure remained almost unchanged. Dividend income of households increased by 26 per cent. Social security benefits received by households grew by 3.1 per cent. Direct taxes went up by 1.8 per cent. Households' entrepreneurial income grew by 2.3 per cent. Entrepreneurial income from forestry went down by five per cent and that from agriculture by nine per cent, but other entrepreneurial income grew by five per cent. Imputed income from owner-occupied dwellings grew by five per cent.

Final consumption expenditure of households grew by 4.1 per cent in nominal terms, i.e. slightly less than disposable income. The savings rate, that is, the proportion of savings relative to disposable income, was 1.9 per cent, having been 0.6 per cent twelve months earlier. Households' fixed investments grew by 9.5 per cent as housing investments continued strong. The financial position of households showed a deficit of EUR 1.2 billion, as against EUR 1.8 billion in the year before.

Households' indebtedness rate increased and was 77.7 per cent at the end of September. In 2003, it was 74.6 per cent. The indebtedness rate expresses the ratio between the credit stock relative to annual disposable income.

Next revision in July 2005

The data for 2004 will be next revised in mid-July. The data for the first quarter of 2005 will be published on 9 June 2005.

Last update 28.2.2005