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1.2.2012 Situation and Outlook 1/2012: Balance of trade has collapsed – weak competitiveness threatens jobs
Situation and Outlook 1/2012: Balance of trade has collapsed – weak competitiveness threatens jobs
The number of new orders in the industry remained at a lower level and order books shrank slightly towards the end of the year. The development of exports has been weaker than in competitor countries, and for the first time in 20 years, Finland has fallen into a trade deficit. Exports may remain at a permanently lower level if competitiveness is not improved. In this challenging economic situation, the Finnish government should use revenue policy to support job creation, investments and growth.
The turnover of technology industry companies in Finland grew to approximately EUR 68 billion in 2011. In 2008, the corresponding figure was EUR 82 billion. In technology industries, development remained positive at the beginning of the year, as regards both new orders and order books. Towards the end of the year, new orders remained at a lower level and order books shrank slightly. Development remained very uneven between companies.
According to the Federation of Finnish Technology Industries' survey of order books, the monetary value of new orders in the industry between October and December was six per cent lower than in the corresponding period of 2010, but four per cent higher than in the preceding quarter. Compared to the pre-crisis level of the autumn of 2008, the volume of new orders was down almost one third between October–December 2011.
At the end of December, the value of order books was eleven per cent higher year-on-year, but four per cent lower than at the end of September. Compared to the pre-crisis level, order book volume was down by 40 per cent at the end of December.
Based on the order trends of recent months, the turnover of technology industry companies is expected to remain at a similar level in early 2012 than in the corresponding period last year, albeit still considerably below the pre-crisis level of autumn 2008.
Despite the growth in turnover, the number of technology industry personnel in Finland increased only slightly during 2011. At the end of the year, the industry employed a total of 288,000 people. Today, the technology industry employs some 40,000 fewer people than it did before the financial crisis in 2008.
Significant drop in the level of Finnish exports
As a result of the financial and economic crisis, the decrease in the level of exports in Finland is proving to be even greater than anticipated. The drop is not temporary, and there is a risk of permanent change. This would be the first time this happened in Finland.
Balance of trade and current account have fallen throughout the 2000s. For the first time in 20 years, Finland has fallen into a trade and current account deficit.
The current level of Finland’s goods and services exports is almost EUR 20 billion short of the 2008 pre-crisis level in annual terms. Considering the increase in costs that has occurred since, exports are up to EUR 30 billion short.
Some half of the decrease originates in electronics, and one third in mechanical engineering. Rest of the decrease originates in other industry sectors.
Industry competitiveness is currently not enough to maintain the number of jobs in Finland. If the competitiveness of Finnish export industry is not restored, the cost of maintaining the welfare state will become unbearable.
Stable growth in exports necessary
Finnish decision-making must support industry renewal and sources of growth. Export industry has an essential role in our future. Approximately half of Finland’s welfare budget is financed by exports, as much as 60 per cent of which are accounted for by the technology industry.
Success in spite of the prevailing uncertainty of today’s global economy requires focused decisions that strengthen the competitiveness of individual businesses and of Finland as a whole.
- The Finnish government and parliament are responsible for the competitiveness of Finland, whereas companies are responsible for theirs. Finland should be a country where companies are encouraged to grow, invest and renew themselves. This is currently not the case, says CEO Jorma Turunen of the Federation of Finnish Technology Industries.
To succeed globally, companies must possess solid expertise. Investments into such expertise should not vary depending on market fluctuations. The renewal of universities is a positive development that should continue. Next in line is the structural change of universities of applied sciences. We are threatened by a shortage of expertise.
Technology industries call for solutions that support industry renewal, investments and growth. The Finnish government should use revenue policy to improve the competitiveness of our exports.
- We must work together and focus on improving the competitiveness of Finnish export industry. The government and all the ministers must assess their decisions and consider how they support the positive development of exports. It is important that the gravity of the situation is widely understood. If Finnish exports remain at their current, low level, the very foundation of our welfare society crumbles, emphasises CEO Jorma Turunen of the Federation of Finnish Technology Industries.
Situation and Outlook of the Finnish Technology Industry 1/2012 (pdf)
Further information:
Jorma Turunen, CEO, tel. +358 9 192 3310, +358 500 445 444
Mika Nykänen, Director, Communications, tel. +358 40 825 7329
Jukka Palokangas, Chief Economist, tel. +358 9 1923 3358, +358 40 750 5469
