The Finnish economy experienced a positive outlook in 1997. GDP growth was close to 6 percent. The sound economic growth was based on the rapid expansion of exports (13.5%) and on a healthy increase in industrial production and construction. In 1998 the GDP growth is expected to continue, but at a lower rate.
Due to a favourable increase in exports the current account surplus widened to FIM 33 billion (5.3% of GDP), which was FIM 13 billion more than in 1996. The trade balance has been bolstered by strong growth in exports, peaking to FIM 54 billion, FIM 10 billion more than in 1996.
The volume of private consumption rose 4.5 percent. The fastest growth was in durable goods and foreign travel.
Unemployment is still the main economic problem with an average rate of 14.5 percent in 1997. Though the situation slightly improved during the year, unemployment is a significant factor behind the public sector deficit.
Inflation is below the lower EU average. Consumer prices increased by 1.2 percent in 1997. The rise in most cost factors remained moderate, and unit labour costs rose approximately only 1.5 percent compared to the previous year. Import prices rose about 1 percent and export prices by 1.7 percent respectively.
The monetary policy has fulfilled the EMU criteria keeping interest rates low and Finnish markka stable against EMS currencies during 1997. The three-month interest rates in Finland have been at the same level as those in Germany and France during 1997.
|
Changes, % |
1996 |
1997 |
|
GDP |
2.9 |
5.5 |
|
Consumer prices |
0.6 |
1.9 |
|
Private investment |
8.4 |
10.0 |
|
Private consumption |
3.4 |
3.5 |
|
Current account. % of GDP |
3.5 |
5.4 |
|
Trade balance. % of GDP |
7.7 |
8.9 |
|
EMU debt. % of GDP |
58.5 |
58.8 |
|
Industrial production |
3.4 |
8.2 |
|
Unemployment |
15.7 |
14.5 |
Demand for forest industry products in Europe developed favourably most of the year in 1997 and thus the export oriented output in Finland increased by an average of 14 percent. New production records were achieved in all main product categories. The average operating rate was up to 94 percent from 85 percent in 1996. Thus the brisk growth of production was largely a result of the low activity level in 1996.
At 10.4 million m3, output of sawn timber was 12 percent up compared to 1996. Plywood production increased 14 percent to 987 000 m3. Total pulp production also increased by 14 percent. Chemical pulp output rose by over 15 percent to 6.6 million tons. Production of mechanical pulp increased by 13 percent up to 4.5 million tons.
Paper and paperboard production totalled 12.1 million tons, with an increase of 16 percent or 1.7 million tons compared to 1996. Two-thirds of the increase was attributable to a higher operating rate and the remaining one-third to new capacity coming on stream. In 1997 the largest capacity increase was the start of the new 350 000 tons woodfree paper machine of Enso in Oulu.
Output of printing and writing papers increased by 22 percent reaching a level of 7.1 million tons. These grades account for 58 percent of the total paper and paperboard production. Newsprint output rose nearly 11 percent. Paperboard output increased at a slower-than-average rate, close to 8 percent up to 2.6 million tons.
In 1997 the volume of forest industry exports increased by 15 percent (based on the data of the first 11months), also reaching record levels. Paper and paperboard exports increased by 18 percent in line with a production growth rate of 16 percent respectively. Pulp exports increased by 14 percent. The sawn timber export increase was more moderate, ending close to 5 percent.
In spite of the healthy demand in the paper market, the price level remained low. Although there were some minor positive developments during the year, average export prices were some 2-3 percent below the corresponding level in 1996. At the end of 1997 the economic crisis in East Asia started to press down pulp prices. Export income increased by 12 percent totalling FIM 61 billion for 1997.
In 1997 the profitability of the Finnish forest industry companies improved in spite of the poor price development, resulting in a 9 percent increase in turnover in financial terms(6 percent in 1996). The main reason behind this positive change was the high operating rate throughout the forest industry and especially in paper production (95 percent) where the effect of economies of scale was now seen.
In 1996 Finnish forest industry investment peaked to FIM 10 billion. In 1997 the investment boom slowed down to FIM 6 billion.
Sustainability in wood production has a long tradition in Finland. Since UNCED (Rio de Janeiro 1992) and Helsinki Ministerial Conference on the Protection of Forests in Europe (1993) all the dimensions of sustainable forest management, e.g. economical, social, ecological and cultural aspects, have been up for discussion internationally. Forest policy in Finland has changed, which has led to the reform of her forestry legislation. The previous laws had already guaranteed sustainable wood production, but the current legislation takes other dimensions of sustainable forest management better into consideration. The new Forest Act came into force on 1 January 1997. It ensures the implementation of biological diversity. Besides the legislation reform, new forestry practices influence Finnish forests because the new methods pay more attention to the biodiversity of forest nature. The Finnish Nature Conservation Act was renewed together with the forestry legislation.
According to the UNCED recommendations the working out of so-called regional target programmes for forestry is under way. The national forest programme based on the aforesaid target programmes will be implemented during 1998 and essential stakeholders will participate (as well as target programmes).
Also an Environmental Programme for Forestry based on UNCED forestry principles was drawn up in 1994. The Environmental Programme for Forestry has guided Finnish forestry towards the national and international targets for forest biodiversity and forest environment management. The programme implementation has been monitored by a broad-based expert committee.
About 6.6 percent or 1.5 million ha of Finnish forests (forests proper and low-yield scrubland, equating roughly with the FAO forest definitions) are protected within statutory conservation areas and confirmed conservation areas. All in all, 11.3 percent or about 2.9 million ha of the entire forested land area (also including non-productive land) are protected. The government agencies and institutions have made such decisions, which will further enlarge the protected area. Furthermore private forest owners have voluntarily protected forest areas.
Finland has been very active in forest certification. The Forest Certification Committee, led by both the Minister of Agriculture and Forestry and the Minister of Environment, finished its task in the spring of 1997. The committee noted that voluntary forest certification carried out by an independent body is called for to enable Finland to verify its responsible, high level forestry management to the market. The committee recommended creating such a certification system, which is compatible with Finnish small-scale forestry and all potential international certification systems.
The Working Group on Forest Certification Standards released its Proposal for Certification Scheme for the Sustainable Management of Forests in Finland in the spring of 1997. The proposal is compatible with Finnish conditions and all the essential stakeholders were represented in the working group. The proposal is based on group certification and its criteria of SFM is based on, among other things, criteria of the Helsinki process and FSC general principles and criteria. The proposal also takes into account the International Standardisation Organisation (ISO) and EU environmental management systems (EMS and EMAS). The proposal has been tested in three different regions. The tests proved that the regional group certification is the only sensible system in Finland. Test results also showed that further efforts are still needed, despite the fact that Finnish criteria and FSC principles are highly compatible. The development work will continue during 1998.
Also developing and establishing of environmental management systems (ISO 14001/EMAS) in forestry organizations continues in Finland. The revision of EMAS regulations is continuing in the EU Commission and its suitability to forestry will be improved.
Finnish legislation and forestry practices ensure that the principles of sustainable forest management are followed. In 1997 commercial roundwood fellings were at a record level, nearly 53 million m3. The total drain was about 65 million m3 and the annual increment about 76 million.m3. Wood consumption in forest industries was about 75 million m3 including wood residues. In order to satisfy raw wood needs forest industry imports annually about 8-9 million m3. Forest industry also consumed 0.6 million tons (estimation) of waste paper. The recovery rate of waste paper in 1996 was 61 percent.
