COMMISSION STAFF WORKING DOCUMENT Country Report Finland 2017 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}
Date: 2017-02-22
Institutions: European Commission, Secretariat-General
Subjects: EU employment policy, EU investment, Finland, economic development, economic recovery, euro area, fiscal policy, macroeconomics, multilateral surveillance, structural adjustment

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 22.2.2017  SWD(2017) 91 final   COMMISSION STAFF WORKING DOCUMENT Country Report Finland 2017 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011  {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}   
 
 
CONTENTS 

Executive summary 

1. 

Economic situation and outlook 

2. 

Progress with the country-specific recommendations 

3. 

Summary of the main findings from the MIP in-depth review 

4. 

Reform priorities 

4.1.  Public finances and taxation 

4.2. 

Financial sector 

4.3. 

Labour market, education and social policies 

4.4. 

Investment 

4.5. 

Sectoral policies 

4.6.  Public administration 

A.  Overview Table 

B.  MIP Scoreboard 

C. 

Standard Tables 

References 

LIST OF TABLES 

1.1. 

2.1. 

Key economic, financial and social indicators - Finland 

Summary table on 2016 CSR assessment 

3.1.  MIP Assessment Matrix (*)  Finland 2017 

4.2.1.  Key banking sector indicators 

4.4.1.  Changes in employment 2005-2015 by education and demand for more educated 

employment 

B.1. 

The MIP Scoreboard for Finland 

C.1. 

Financial market indicators 

C.2. 

Labour market and social indicators 

C.3. 

Labour market and social indicators (continued) 

C.4. 

Product market performance and policy indicators 

C.5.  Green growth 

1 

2 

8 

11 

15 

15 

19 

24 

30 

36 

40 

41 

46 

47 

52 

7 

9 

13 

19 

33 

46 

47 

48 

49 

50 

51 

 
 
 
 
LIST OF GRAPHS 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

1.7. 

1.8. 

Real GDP growth and growth contributions, 2005-2018, Finland 

Contributions to potential growth 

Change in employment rates by age cohorts and gender, 2005-2015 

Employment ratio and economic dependency ratio 

Nominal unit labour costs, 2005=100 

Export market shares 

Decomposition of growth of debt 

Public deficit and debt, % of GDP 

4.1.1.  General government deficit 2002-2015, % of GDP 

4.1.2.  General government expenditure by function and revenue (% of GDP) 

4.1.3.  Share of environmental taxes in GDP, selected EU countries 

4.2.1.  Banks’ costs-to-income ratio, % 

4.2.2.  Growth of banks’ loans to non-financial corporations, %, y-o-y, 2004q1-2016q3 

4.2.3.  Relative house prices, Finland 

4.2.4.  Non-financial corporations liabilities, %, y-o-y 

4.2.5.  Drivers for non-financial corporations debt-to-GDP ratio 

4.2.6.  Drivers for households’ debt-to-GDP ratio 

4.2.7. 

Loan restructuring, debtors in enforcement 

4.3.1.  Key labour market indicators 

4.3.2.  PISA: Share of top performers in science- Finland 

4.4.1.  Breakdown of growth in export market shares 

4.4.2.  Real effective exchange rates, selected countries, 2005=100 

4.4.3.  Drivers for REER developments, Finland 

4.4.4.  Nominal unit labour costs by industry, 2010=100 

4.4.5.  Breakdown of export market shares, Finland 

4.4.6. 

Trade balance of goods according to broad economic classification of goods. 

4.4.7.  Speed of structural change, Finland 

4.4.8.  Short-run speed of structural change, selected countries 

4.4.9.  Reorientation of the economy towards lower productivity industries 

4.5.1. 

Total intramural R&D expenditure (GERD) by sectors of performance in Finland between 

2005 and 2014 

LIST OF BOXES 

1.1. 

2.1. 

Selected highlights: the Competitiveness Pact 

Contribution of the EU budget to structural change in Finland 

4.3.1. 

Towards the Finnish wage-setting model – what are the challenges? 

4.4.1. 

Investment challenges and reforms in Finland 

2 

2 

3 

3 

4 

4 

5 

5 

15 

15 

18 

20 

21 

21 

22 

22 

23 

23 

24 

29 

30 

30 

31 

31 

31 

32 

32 

33 

33 

36 

6 

10 

25 

35

 
 
 
EXECUTIVE SUMMARY 

This report assesses Finland’s economy in the light 
of  the  Commission’s  Annual  Growth  Survey 
published on 16 November 2016. In the survey the 
Commission  calls  on  EU  Member  States  to 
redouble their efforts on the three elements of the 
virtuous  triangle  of  economic  policy  –  boosting 
investment,  pursuing  structural 
reforms  and 
ensuring  responsible  fiscal  policies.  In  so  doing, 
Member States should put the focus on enhancing 
social  fairness  in  order  to  deliver  more  inclusive 
growth.  At 
the  Commission 
published the Alert Mechanism Report (AMR) that 
initiated  the  sixth  round  of  the  macroeconomic 
imbalance  procedure.  The  in-depth  review,  which 
the  2017  AMR  concluded  should  be  undertaken 
for  the  Finnish  economy,  is  presented  in  this 
report. 

the  same 

time, 

a 

three-year-long 

Following 
economic 
downturn,  a  gradually  strengthening  recovery 
started in 2015. The economy is expected to have 
expanded  by  1.5 %  in  2016  and  is  expected  to 
continue to grow in 2017-2018 by 1.2 % and 1.5 % 
respectively.  Domestic  demand, 
in  particular 
construction investment, is expected to be the main 
driver  for  growth  in  the  near  term,  alongside  a 
strengthening  export  performance.  The  labour 
market situation has also started to improve, with a 
decline  in  headline  unemployment  rates,  although 
long-term unemployment continues to increase.  

The  potential  growth  rate  of  the  Finnish 
economy remains close to zero. Potential growth 
fell  significantly  from  the  start  of  the  crisis  and 
remains  at  a  subdued  level.  This  is  due  to  a 
shrinking  working-age  population 
alongside 
subdued total factor productivity growth following 
in  particular  the  decline  of  the  electronics  and 
paper 
fallen.  The 
increasing  public  debt  could  limit  the  scope  for 
growth-enhancing public investment in the future. 

Investment  has 

industry. 

a  period 

of  uncertainty 

increases  annual  working 

The  signing  of 
the  Competitiveness  Pact 
between the social partners in 2016 put an end 
to 
in  wage 
developments.  The  Pact  freezes  wages  for  2017 
and 
time  without 
additional  compensation.  In  addition,  employees 
will be permanently responsible for paying a larger 
proportion of social contributions. These measures 
are  expected  to  improve  cost  competitiveness  and 
support  exports  and  employment  in  the  coming 
years.  For  the  public  sector,  the  Pact  brings  cost 

1 

savings by temporarily reducing employees' annual 
holiday bonuses. However, these savings are more 
than  outweighed  by  the  reduction  in  taxes  and 
the  government 
social  contributions  which 
introduced  as  a  compensation  for  the  wage  freeze 
and  the  shift  of  social  contributions  towards 
employees.  Therefore  the  short-term  effect  of  the 
Pact on public finances is projected to be negative 
but  the-long-term  effect  positive  thanks  to  the 
expected 
in  employment.  The 
improved cost competitiveness is also expected to 
encourage investments. 

improvement 

Implementation of the 2015 pension reform has 
started  in  2017.  The  lowest  statutory  retirement 
age  will  start  to  increase  gradually  and  it  will  be 
connected  to  life  expectancy  in  2027.  This  is 
expected to contribute towards higher participation 
rates  for  older  workers  and  therefore  increased 
total  employment.  Against  the  background  of  an 
ageing population and an increase in the economic 
dependency  ratio,  which  is  projected  to  rise 
significantly  by  2025,  this  reform  should  help  to 
improve the sustainability of the pension system. 

Both  public  and  private  debt  has  increased 
marginally. The ratio of gross public debt-to-GDP 
has  risen,  but  at  around  64  %  of  GDP  it  is 
relatively  low  compared  to  the  euro  area  as  a 
whole.  Households'  debt  increased  in  2016,  with 
credit  growth  supported  by  favourable  credit 
conditions, 
interest  rates.  The 
low 
growth of non-financial corporations’ debt slowed 
down in 2016, after a rapid increase of intra-group 
loans  in  2015.  The  financial  sector  remains  well 
capitalised. 

including 

its 

Overall,  Finland  has  made  some  progress  in 
addressing 
country-specific 
2016 
recommendations.  The  government  has  taken 
political decisions on the reform of the social and 
healthcare  services,  and  public  consultations  have 
been  carried  out  on  major  parts  of  the  draft 
legislation.  Therefore  some  progress  has  been 
made  in  addressing  the  recommendation  on  fiscal 
sustainability.  In  line  with  the  labour  market 
recommendation, 
the  Competitiveness  Pact 
reduces labour costs for employers and extends the 
possibilities  for  local  level  bargaining.  A  new 
wage-setting  model  is  being  negotiated  where 
wage increases in tradable industries would set an 
anchor  for  the  wages  in  non-tradable  sectors.  The 
cost 
to 
Pact 

expected 

improve 

the 

is 

 
 
Executive summary 

including 

Non-cost  competitiveness  acts  as  a  drag  on 
export  performance.  Progress  has  been  made  in 
opening up  services  sectors  such  as retail  trade  to 
competition,  and  a  number  of  other  domestic 
service  sectors, 
taxis,  have  been 
identified  as  candidates  for  future  reform.  While 
international comparisons rank Finland among the 
leading  countries  in  the  world  in  terms  of  its 
business  environment  and  investment  appeal,  the 
existing stock of inward investments in Finland is 
below the EU average when compared to the size 
of the economy. 

is  unfolding,  but 

Structural  change 
the 
reorientation  of  the  economy  seems  to  have 
slowed  down  recently.  After  a  decline  in  IT 
manufacturing,  information  and  communications 
technology services have become a more important 
exporting sector. The recent rapid increase in start-
ups  is  expected  to  contribute  to  the  gradual 
diversification of production structures. Policies to 
support  start-ups  and  the  internationalisation  of 
small  and  medium  sized  enterprises  are  in  place, 
and  the  government  has  outlined  plans  to  enable 
and promote entrepreneurship further, including by 
reducing the administrative and regulatory burden.  

Private  sector  debt  is  expected  to  remain  high 
but  the  financial  sector  is  robust.  Non-financial 
corporations’  debt  may  be  reduced  in  the  coming 
years  due  to  increased  profitability  resulting  from 
the  Competitiveness  Pact.  The  recent  policy 
measures,  i.e.  phasing  out  the  deductibility  of 
mortgage  interest  payments  in  personal  income 
taxation  and  a  loan-to-value  cap  as  of  July  2016, 
are  expected  to  moderate  households’  borrowing 
somewhat.  That  said,  households’  debt  is  low 
compared  with  Denmark  and  Sweden,  and 
households  are  not  expected  to  reduce  their  debt 
given the favourable borrowing conditions. Levels 
of  non-performing  loans  remain  low  and  the 
banking sector is generally solid. 

The  public  debt-to-GDP  ratio  has  started 
decelerating  and  is  projected  to  stand  around 
66.5 %  in  2018.  The  government  has  committed 
itself  to  consolidating  public  finances  and  the 
deficit is projected to decline in the medium term. 
According to the government’s fiscal strategy, debt 
should  be  on  a  downward  trend  in  2019.  The 
pension  reform  implemented  from  2017  and  the 
ongoing  reform  of  the  healthcare  and  social 

to  accept 

competitiveness  of  the  economy.  From  2017,  the 
incentives 
job  offers  have  been 
strengthened: the period of entitlement to earnings-
related  unemployment  benefits  was  cut  by  a  fifth 
to  400  days  and  the  fees  for  early  childhood 
education  have  been  reduced,  in  particular  for 
low-income  parents.  A  new  initiative  using  the 
social impact bond model has been put in place to 
better integrate migrants to the labour market. This 
constitutes  some  progress  towards  addressing  the 
labour  market  recommendation.  The  government 
put  forward  a  package  which  provides  new 
opportunities  for  the  creation  and  growth  of 
enterprises. Significant reform measures have been 
proposed in the transport sector and are underway 
for  the  gas  market,  in  line  with  the  developments 
of  the  Balticconnector  pipeline  project.  These 
policy  initiatives  have  led  to  some  progress  in 
addressing the competitiveness recommendation.  

Regarding progress in reaching the national targets 
under  the  Europe  2020  strategy,  developments  in 
2016  were  generally  positive.  Even  though  the 
ambitious  target  will  be  difficult  to  meet,  the 
employment  rate  increased  in  2016.  The  poverty 
rate  is  low  compared  to  the  EU  average  but  it 
doubled  as  a  consequence  of  the  two  severe 
recessions.  Recently 
it  has  not  decreased 
substantially,  and  the  target  for  poverty  reduction 
seems  unattainable.  The  early  school  leaving  rate 
declined  slightly 
it  could  be 
challenging  to  meet  the  target.  Finland’s  tertiary 
its 
educational 
improving  trend  in  2015  and  is  already  above  the 
target. Finland continues to be on track to reach its 
renewable  energy  and  greenhouse  gas  reduction 
targets.  However,  the  very  ambitious  R&D  target 
is  likely  to  be  missed,  as  R&D  investment  has 
decreased in recent years.  

in  2015  but 

attainment 

continued 

rate 

findings  of 

The  main 
review 
contained  in  this  report,  and  the  related  policy 
challenges, are as follows:  

in-depth 

the 

Cost competitiveness is expected to improve on 
the back of the Competitiveness Pact. The Pact’s 
positive  impact  on  exports  and  employment  is 
expected to materialise gradually. The discussions 
on  the  new  wage  setting  model  for  the  upcoming 
wage  negotiation  rounds  are  still  under  way  and 
reaching  an  agreement  will  be  crucial  to  secure 
these expected positive effects. 

2 

 
 
services  will  help 
sustainability risks. 

reduce 

the  medium-term 

Other key economic issues analysed in this report 
which  point 
facing 
Finland’s economy are as follows:  

to  particular  challenges 

  The 

to  reform 

legislation  needed 

the 
healthcare  and  social  services  system  has 
been  agreed  by  the  government.  The  main 
aims of the reform include improved access to 
healthcare  and  containing  cost  increases  to 
the  need  for  fiscal  sustainability. 
address 
Before  the  legislation  is  passed,  agreement  is 
also  needed  on  the  most  controversial  issues: 
freedom  of  choice  and  the  role  of  private 
healthcare providers in the new system. 

Executive summary 

  The  labour  market  situation  has  started  to 
improve  but  some  employment  and  social 
challenges  remain,  such  as  the  continued 
increase  in  long-term  unemployment.  This 
highlights the need to better target active labour 
market  policies  and  to  continue  to  invest  in 
life-long  learning  and  vocational  training.  To 
achieve  a  higher  employment  rate    including 
for  migrants 
the 
challenges  posed  by  an  ageing  population. 
While  the  activity  rate  is  improving  overall,  it 
has  declined  for  the  25-39  age  group.  The 
complex  benefit system,  with  its  various  types 
of  allowances,  can 
in  significant 
result 
inactivity and low-wage traps. 

is  essential 

to  counter 

3 

 
 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth  

Following  three  years  of  contraction,  Finland’s 
economy is growing again. In 2015, the economy 
grew  by  0.3 %  and  in  2016  the  Commission 
expects growth to have accelerated to about 1.5 % 
on the back of increased private consumption and 
investment. The economy is projected to continue 
to  expand  by  1.2 %  and  1.5 %  in  2017  and  2018 
respectively.  Towards  the  end  of  the  forecast 
horizon, GDP growth is expected to become more 
balanced, with both domestic and external demand 
supporting growth.  

Graph 1.1: 

Real GDP growth and growth contributions, 
2005-2018, Finland 

potential  to  increase  labour  productivity;    low 
productivity  growth  in  turn  requires  continued 
wage moderation to retain competitiveness); and 

(iv) 
a drag on growth.  

high private and public sector debt acts as 

Measures  to  support  an  environment  which  is 
conducive to investments, research and innovation, 
and  structural  change  towards  higher-productivity 
activities  could  help  the  economy  to  move  out  of 
the low-growth equilibrium.  

Graph 1.2:  Contributions to potential growth 

Source: European Commission, 2017 Winter Forecast  

Potential GDP growth  

Potential  real  GDP  growth  is  not  expected  to 
return to pre-crisis growth rates in the medium 
term.  Prior  to  the  crisis,  potential  GDP  grew 
rapidly  especially  due  to  increases  in  total  factor 
productivity as the economy adjusted towards high 
productivity  industries.  However,  the  economy 
risks  becoming  trapped  on  a  low-growth  path 
where:  

(i) 

working age population declines;  

(ii) 

total factor productivity stagnates;  

(iii) 
investments  remain  at  a  low  level  (in 
particular  the  decline  in  research  investment  and 
the 
moderate  equipment 

investment 

restrain 

Source: European Commission, 2017 Winter Forecast 

Labour market  

The labour market situation started to improve 
in 2016. The employment rate (15-64) increased to 
70.5% by the third quarter of 2016, 0.6 pps higher 
than  in  previous  year.  The  unemployment  rate 
peaked at 9.4 % in 2015 and fell to 8.8% in 2016. 
The  latest  unemployment  rate  data  (7.9 %  in 
December  2016)  show  a  year-on-year  decline  of 
1.3 pps.  Youth  unemployment  (age  group  15-24) 
also started to decline. It fell by 2.3 pps to 20.1 % 
in  2016  approaching  the  EU  average  of  18.8 %. 
Long-term  unemployment  is  expected  to  have 
peaked at 2.3 % in 2016. 

Labour  market  policies  are  challenged  by  the 
retirement  of  the  ’baby  boom’  cohorts  and  the 
decline  in  employment  in  younger  age  groups. 
The  largest  cohort  was  born  in  1947  and  reached 

2 

-10-8-6-4-20246805070911131517%, ppsInventories investmentInvestment (GFCF)ConsumptionNet exportsReal GDP growth-0.50.00.51.01.52.02.53.00507091113151719Rate of change y-o-y (%)Capital Accumulation ContributionTFP ContributionTotal Labour (Hours) ContributionPF Potential Growth 
 
 
 
the  lowest  statutory  retirement  age,  63,  in  2010. 
Since then the working age population (15-64) has 
been  shrinking.  To  preserve  the  sustainability  of 
the  pension  system,  the  earnings-related  pension 
system was reformed in 2005 when the incentives 
to work longer were strengthened. A new pension 
reform  took  effect  from  2017,  when  the  lowest 
to  gradually 
statutory  retirement  age  started 
increase,  from  63  to  65  by2027.  Measures  to 
remove  early  exit  pathways  have  led  to  higher 
employment  rates  of  older  workers.  However,  at 
the  same  time,  employment  has  fallen  among  the 
20-39  age  group.  Overall,  in  2005-2015,  the 
employment  rate  of  15-74  year  olds  declined, 
especially among men.  

in 

long 

The economic dependency ratio (1), is at risk to 
increase 
term. 
the  medium  and 
Population  projections  and  assumptions  on 
employment  rates  according  to  the  Commission’s 
2015 Ageing Report lead to a worsening economic 
dependency  ratio  from  about  120  in  the  early 
2000s  to  about  135  by  2025.  This  highlights  the 
need 
increase 
employment  to  ensure  the  sustainability  of  the 
social security system. 

to  continue  reforms 

that  will 

Graph 1.3:  Change in employment rates by age cohorts 

and gender, 2005-2015 

Source: European Commission 

(1)  A  ratio  of  people  aged  14  and  below,  people  at  65  and 
above  and  people  not  in  employment  aged  15-64  and 
number of employed aged 15-64. 

1. Economic situation and outlook 

Graph 1.4: 

Employment ratio and economic dependency 
ratio 

Source: European Commission, Statistics Finland 

Social developments 

is 

low 

inequality 

in  Finland 

Income 
in 
comparison  to  other  EU  countries.  The  richest 
20 % of the population had 3.6 times the income of 
the poorest 20 % in 2015, compared with 5.2 times 
in 
the  whole  EU.  The  Gini  coefficient  of 
equivalised disposable income was at 25.2 in 2015, 
reflecting  a  more  equal  income  distribution  than 
the EU average (Gini coefficient of 31.0). Income 
equality,  as  measured  by  both  indicators,  has 
remained  stable 
in  recent  years. 
in  Finland 
Households’  net  wealth  (2)  however  is  not  as 
evenly  distributed  as  income,  but  remains  within 
the range observed in other EU countries for which 
data were collected in 2013-2014 (ECB 2016). 

The risk of poverty has declined gradually since 
its  peak  in  2011.  In  2015,  the  at-risk-of-poverty 
rate after social transfers/pensions, at 12.4 %, was 
about 4 pps. lower than the EU average. However, 
the recent economic downturn led to an increase in 
the  number  of  long-term  unemployed,  and  in  the 
number of 15-24 year-olds who do not study, work 
or participate in (vocational) training. This is likely 
further 
to 
improvements  in  income  equality  and  in  the  fight 
against poverty in the near future. It is also worth 
recalling  that  the  legacy  of  the  1990s  recession,  a 
considerable  increase  in  the  risk  of  poverty, 

significant 

scope 

limit 

the 

for 

(2)  Difference between total assets and total liabilities. 

3 

-6061218FemaleMale6466687072100110120130140150200020052010201520202025Economic dependency ratio (LHS)Employment ratio (RHS)Forecast 
 
 
                                                           
 
                                                           
remained  uncorrected  despite 
the  economic 
upturns  that  followed.  The  government’s  EU2020 
target,  no  more  than  770 000  persons  at  risk  of 
poverty  or  social  exclusion,  seems  unlikely  to  be 
reached. In 2015, the corresponding number was at 
904 000,  with  only  a  marginal  (7 000)  decrease 
since 2008. 

Competitiveness 

Competitiveness  losses  are  expected  to  start 
reversing gradually over the medium run. Cost 
competitiveness  compared  to  peer  countries  has 
been improving already over recent years and will 
improve  further  in  2017  given  the  recent  labour 
market  agreement,  the  Competitiveness  Pact  (see 
box  1.1  and  graph  1.5).  Exports  are  projected  to 
turn  to  growth  as  of  2017,  and  in  2018  the 
contribution  of  net  exports  to  GDP  growth  is 
expected  to  be  positive  again.  Although  the 
outlook  for  exports  has  improved,  uncertainty 
related 
the  external  environment  remains 
significant,  in  particular  with  regard  to  demand 
from  the  EU  and  the  speed  of  the  economic 
recovery  in  Russia  in  2017-2018.    Also  the 
challenges  related  to  non-cost  competitiveness, 
such  as  the  low  productivity  growth,  the  small 
number  of  exporting  SMEs  and  the  concentration 
of  export products  in  intermediate  and  investment 
goods,  remain.  The  current  account  deficit  has 
been contracting since 2012, when the deficit was 
1.9 %  of  GDP,  reaching  about  0.4 %  of  GDP  in 
2015.  

to 

1. Economic situation and outlook 

Graph 1.5:  Nominal unit labour costs, 2005=100 

Source: European Commission, 2017 Winter Forecast 

Graph 1.6: 

Export market shares 

Source: European Commission 

Financial sector  

High  private  sector  debt  entails  vulnerabilities 
but  the  financial  sector  remains  stable  and 
strong.  The  private  sector  debt-to-GDP  ratio  has 
remained  on  an  increasing  trend,  and  in  2015 
jumped to about 156 % of GDP mainly due to the 
increase in the foreign borrowing of non-financial 
corporations. Households’ debt-to-gross disposable 
income  increased  to  112 %  which  is  an  all-time 
high  for  Finland  and  above  the  euro  area  average 
of about 94 %. At same time it remained below the 

4 

951001051101151201251301350506070809101112131415161718FIDESEEA excl. FI and DE-40-30-20-10010203000010203040506070809101112131415Rate of change y-o-y (%)Contribution: World export growth (neg. Sign)Contribution: Finland export growthEMS growth rate 
 
 
 
1. Economic situation and outlook 

implementation of expenditure cuts in line with the 
fiscal  plan  and  the  reduction  of  public  sector 
employees’ holiday bonuses. In 2018, the deficit is 
expected  to  fall  again  to  1.8 %  of  GDP  thanks  to 
increasing  economic  activity  and  expenditure  cuts 
foreseen in the fiscal plan. 

Graph 1.8: 

Public deficit and debt, % of GDP 

corresponding  ratios  for  Sweden  (166 %)  and 
Denmark (256 %). However, households and non-
financial  corporations  have  benefited  from  low 
interest  rates  and  service  their  debt  well,  as 
indicated  by  the  low  amount  of  non-performing 
loans.  The  banking  sector  is  highly  concentrated, 
the  Nordic 
interconnected 
the  banks  are 
countries  and  are  dependent  on  wholesale 
financing.  Most  of  the  household  debt  consists  of 
mortgage  loans  which  use  the  apartment  or  house 
as  a  collateral.  This  link  between  the  housing 
market  and  the  banking  sector  may  be  somewhat 
stronger  in  Finland  than  in  other  countries,  as  the 
share of owner-occupied housing is higher than in 
the euro area overall.  

in 

Graph 1.7:  Decomposition of growth of debt 

Source: European Commission, 2017 Winter Forecast 

Source: European Commission 

Public finances 

The  balancing  of  government  revenue  and 
expenditure  continues  gradually.  The  budget 
deficit  amounted  to  2.8 %  of  GDP  in  2015  and  is 
expected  to  have  declined  to  2.2 %  of  GDP  in 
2016,  as  a  result  of  expenditure  cuts  and  revenue 
measures  such  as  the  increase  in  unemployment 
insurance  contributions.  These  measures  were 
decided  in  the  general  government  fiscal  plan  for 
2016-19. In 2017, in line with the Competitiveness 
Pact,  personal  income  tax  and  employers’  health 
lowered.  These 
insurance  contributions  were 
measures  lead  to  an  estimated  revenue  loss  of 
0.6 %  of  GDP.  The  overall  deficit  is  projected  to 
worsen  to  2.3 %  of  GDP  in  2017  despite  the 

5 

-5051015202503040506070809101112131415% of GDPFinancial corporationsHouseholdNon financial corporationsGovernmentMIP ThresholdPrivate sector total102030405060708090-6-5-4-3-2-1012345606081012141618Deficit, % of GDP, LHSDebt, % of GDP, RHS 
 
 
 
 
1. Economic situation and outlook 

6 

 Box 1.1: Selected highlights: the Competitiveness PactSeveral analysts (among others Borg and Vartiainen (2015), European Commission (2014), Kajanoja (2012)) pointed to deteriorated cost competitiveness as one of the possible sources of weak economic developments before the parliamentary elections in 2015. The Sipilä government took office in May 2015 and set itself the target to improve Finland's cost-competitiveness by 15% in terms of nominal unit labour costs. Of this, 5pps would be reached through structural reforms leading to higher productivity, 5pps through continuing wage moderation and 5pps through an agreement between the social partners. The central labour market organisations reached an agreement on the Competitiveness Pact (the Pact) in February 2016. During the spring and early summer, employer and employee organisations carried out industry level collective agreement negotiations to introduce the Pact into about 300 industry- or company-level agreements. To enable the conclusion of the industry-level agreements, the government announced in early June that it will cut taxes on labour income in all income categories as of 2017 depending on the coverage of the Pact. By the time of the government budget negotiations in late summer, over 90% of employees were covered by the Pact. Consequently, a 515 million euros tax cut was included in the government’s 2017 budget proposal.  The Pact includes the following measures to reduce labour costs:  annual working time will be increased by 24 hours without additional compensation from 2017  after the expiry of the latest wage agreements (mainly in late 2016 or early 2017), wages will be frozen for 12 months (the exact timing depends on the industry)  a larger share of social security contributions will be shifted permanently towards the employees.  In line with the Pact, public sector employees' annual holiday bonuses, which roughly correspond to 50% of a month's salary, will be temporarily (2017-2019) reduced by 30%, lowering public spending. The savings that are expected to materialise as a result of the Pact will be used to reduce employers' labour costs. Over the long-run, the Pact is expected to have positive impacts on exports, real GDP, employment and public finances. Estimates of the impact of lower wage costs on employment range from 20 000 to 40 000 depending on the method and assumptions used (see for example estimates by Ministry of Finance (2016), Lehto (2016), Economic Policy Council (2016)). The social partners also agreed to extend local bargaining possibilities, and the Pact negotiations are being followed up by negotiations for a new collective wage setting practices, which would emphasise the role of tradable industries' cost-competitiveness (see Section 4.3). Wage increases that will be negotiated after the wage freeze period will be the key in preserving the gains of the Competitiveness Pact.   
 
 
 
 
 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic, financial and social indicators - Finland 

(1) Sum of portfolio debt instruments, other investment and reserve assets. 
(2,3) Domestic banking groups and stand-alone banks. 
(4) Domestic banking groups and stand-alone banks, foreign (EU and non-EU) controlled subsidiaries and foreign (EU and 
non-EU) controlled branches. 
(*) Indicates BPM5 and/or ESA95. 
Source: European Commission, European Central Bank 

7 

2004-20082009201020112012201320142015201620172018Real GDP (y-o-y)3.3-8.33.02.6-1.4-0.8-0.60.31.51.21.5Private consumption (y-o-y)3.3-2.73.12.90.3-0.50.81.52.01.21.3Public consumption (y-o-y)1.51.6-0.1-0.10.51.1-0.50.1-0.1-0.80.1Gross fixed capital formation (y-o-y)3.9-12.51.14.1-1.9-4.9-2.61.13.42.02.5Exports of goods and services (y-o-y)8.3-20.16.22.01.21.1-2.72.00.82.03.3Imports of goods and services (y-o-y) 8.3-16.96.56.01.60.5-1.33.11.31.52.5Output gap1.9-5.1-2.4-0.1-1.6-2.3-2.9-2.8-1.7-1.3-0.6Potential growth (y-o-y)2.30.20.20.20.0-0.10.00.20.40.80.8Contribution to GDP growth:Domestic demand (y-o-y)2.8-4.11.82.4-0.1-1.1-0.31.11.80.91.3Inventories (y-o-y)0.1-2.11.31.5-1.10.00.20.3-0.10.10.0Net exports (y-o-y)0.4-2.10.0-1.5-0.20.3-0.5-0.4-0.20.20.3Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.4-0.2-0.1-0.1-0.1-0.10.00.10.20.50.3Capital accumulation (y-o-y)0.70.40.40.40.40.20.20.20.20.30.3Total factor productivity (y-o-y)1.10.0-0.1-0.2-0.2-0.1-0.2-0.10.00.00.2Current account balance (% of GDP), balance of payments3.71.91.2-1.8-1.9-1.6-1.1-0.4...Trade balance (% of GDP), balance of payments4.72.31.4-0.9-1.1-0.5-0.50.1...Terms of trade of goods and services (y-o-y)-2.11.3-2.1-1.6-1.00.71.32.80.6-1.1-0.8Capital account balance (% of GDP)0.10.0*0.0*0.0*0.0*0.0*.....Net international investment position (% of GDP)-14.03.216.515.111.73.9-2.60.6...Net marketable external debt (% of GDP)1-1.0-11.7*-16.4*-20.9*-31.0*-37.1-39.8-29.5...Gross marketable external debt (% of GDP)198.1138.5161.1190.1204.5188.5196.4181.7...Export performance vs. advanced countries (% change over 5 years)4.4-5.6-12.9-16.7-23.1-24.6-19.5-18.80...Export market share, goods and services (y-o-y)-0.8-10.8-12.0-6.4-5.80.1-3.6-6.6...Net FDI flows (% of GDP)-0.42.01.10.91.3-0.8-6.3-7.5...Savings rate of households (net saving as percentage of net disposable income)0.63.43.21.30.71.5-0.1-0.7...Private credit flow (consolidated, % of GDP)11.60.87.33.67.42.81.29.5...Private sector debt, consolidated (% of GDP)119.8142.8148.9145.3148.6147.7147.5155.8...of which household debt, consolidated (% of GDP)48.459.361.161.363.664.065.566.8...of which non-financial corporate debt, consolidated (% of GDP)71.483.587.884.085.083.782.089.0...Corporations, net lending (+) or net borrowing (-) (% of GDP)3.44.95.21.82.72.33.84.03.43.83.9Corporations, gross operating surplus (% of GDP)27.323.123.923.221.621.421.922.322.623.824.3Households, net lending (+) or net borrowing (-) (% of GDP)-2.9-0.2-1.0-2.1-2.3-1.5-1.9-2.0-2.1-2.3-2.7Deflated house price index (y-o-y)4.4-0.44.80.0-0.4-1.3-1.8-0.4...Residential investment (% of GDP)6.35.26.16.36.36.05.55.6...GDP deflator (y-o-y)1.71.90.42.63.02.61.71.70.91.00.9Harmonised index of consumer prices (HICP, y-o-y)1.51.61.73.33.22.21.2-0.20.41.51.2Nominal compensation per employee (y-o-y)3.62.02.23.62.81.31.01.61.2-0.81.2Labour productivity (real, person employed, y-o-y)1.6-6.03.71.3-2.30.0-0.20.6...Unit labour costs (ULC, whole economy, y-o-y)2.08.5-1.42.35.21.41.11.00.1-1.40.3Real unit labour costs (y-o-y)0.36.5-1.8-0.32.2-1.1-0.6-0.7-0.8-2.3-0.6Real effective exchange rate (ULC, y-o-y)0.86.3-4.80.90.23.21.3-2.9-0.6-2.7-1.6Real effective exchange rate (HICP, y-o-y)-0.83.2-5.7-0.1-2.62.92.4-2.91.2-2.6.Tax wedge on labour for a single person earning the average wage (%)30.829.129.129.829.530.130.730.9...Taxe wedge on labour for a single person earning 50% of the average wage (%)20.0*18.318.318.917.918.919.219.4...Total Financial Sector Liabilities, non-consolidated (y-o-y)14.08.317.726.1-2.7-8.59.2-1.5...Tier 1 ratio (%)2.13.413.514.714.815.316.220.4...Return on equity (%)3.6.26.36.16.58.09.58.5...Gross non-performing debt (% of total debt instruments and total loans and advances) (4).1.10.90.80.80.71.41.3...Unemployment rate7.68.28.47.87.78.28.79.48.88.68.3Long-term unemployment rate (% of active population)1.81.42.01.71.61.71.92.3...Youth unemployment rate (% of active population in the same age group)18.521.521.420.119.019.920.522.420.1..Activity rate (15-64 year-olds)75.575.074.574.975.275.275.475.8...People at-risk poverty or social exclusion (% total population)17.316.916.917.917.216.017.316.8...Persons living in households with very low work intensity (% of total population aged below 60)9.08.49.310.09.39.010.010.8...General government balance (% of GDP)3.6-2.5-2.6-1.0-2.2-2.6-3.2-2.7-2.2-2.3-1.8Tax-to-GDP ratio (%)41.941.140.942.242.843.743.944.144.243.643.7Structural budget balance (% of GDP)..-1.1-0.9-1.2-1.2-1.6-1.1-1.2-1.5-1.4General government gross debt (% of GDP)37.541.747.148.553.956.560.263.563.765.666.5forecast 
 
 
 
2.  PROGRESS WITH THE COUNTRY-SPECIFIC 

RECOMMENDATIONS 

the 

implementation  of 

Progress  with 
the 
recommendations addressed to Finland in 2016 
(3)  has  to  be  seen  in  a  longer  term  perspective 
since the introduction of the European Semester 
in  2011.  Over 
the 
recommendations have focused on public finances, 
fiscal  sustainability,  labour  market  and  business 
environment.  Numerous 
reforms  have  been 
undertaken in these areas. 

this  six  year  period, 

Finland  has  remained  broadly  compliant  with 
the  fiscal  recommendations.  The  medium-term 
objective  has  not  been  met  during  most  of  the 
period,  but  over  2011-2015  Finland  has  made 
progress  towards  it  in  a  manner  which  is  broadly 
compliant  with  the  requirements  of  the  Stability 
and Growth Pact. However, Finland's debt-to-GDP 
ratio  has  risen  above  60%  and  continues  to 
increase. 

To address the recommendations in the area of 
fiscal  sustainability,  an 
important  pension 
reform  was  adopted  in  2015,  a  reform  of 
healthcare and social services is in preparation. 
The  pension  reform  will  gradually  increase  the 
minimum  retirement  age  and  eventually  link  it  to 
the  life  expectancy.  This  is  expected  to  increase 
the  supply  of  labour  while  ensuring  that  the 
pensions  can  be  kept  at  an  adequate  level.  In 
addition,  the  government  is  preparing  reforms  on 
the  administrative  structure  of  the  municipalities 
and  on  the  provision  of  healthcare  and  social 
services. 

the  participation 

There has also been progress in labour market 
reforms.  Active  labour  market  policies  aiming  to 
increase 
rate  have  been 
implemented.  To  improve  competitiveness,  social 
partners  have  agreed  on  very  moderate  wage 
increases and in 2016 a Competitiveness Pact was 
concluded  to  improve  cost  competitiveness  by 
reducing  labour  costs  to  employers.  The  financial 
incentives  to  accept  low-income  or  part-time  jobs 
have  been  improved,  as  since  the  beginning  of 
2014  it  has  been  possible  to  receive  employment-
related  earnings  for  up  to  300  euros  per  month 
without any impact on the unemployment benefit. 
Similarly,  since  2015,  the  housing  allowance  has 

(3)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular section 4.  

8 

included  a  protected  part  of  300  euros,  which  has 
not  been  deducted  when  the  person  receiving 
assistance has received revenue from work. 

The  government  has  also  addressed 
the 
recommendations  regarding  the  competition  in 
services, in particular in retail.  Regulation of the 
retail sector has been eased. As a major step, shop 
opening  hours  were  liberalised  in  2016.  The  land 
use  and  building  act  has  been  modified  so  that 
promoting competition was added to the objectives 
of land use planning so as to take into account the 
need  to  increase  competition.  Alcohol  monopoly 
stores  have  been  opening  next  to  establishments 
other than the dominant retail chains. 

in  addressing 

Regarding  2016,  Finland  has,  overall,  made 
some  (4)  progress 
its  2016 
country-specific  recommendations  (CSRs).  The 
government  has  presented  large  parts  of  the  draft 
legislation  on  the  reform  of  the  social  and 
healthcare  services.  The  social  partners  have 
signed  a  Competitiveness  Pact  which  reduces 
labour  costs  for  employers  and  extends 
the 
possibilities  for  local  bargaining  and  a  new  wage 
setting  model  is being  negotiated.  To  increase  the 
incentives  to  accept  job  offers,  the  obligation  for 
the unemployed to accept a job offer as well as the 
obligation to participate in activation schemes have 
been 
the  duration  of 
earnings-related  unemployment  benefits  was 
reduced. In order to promote entrepreneurship, the 
government put forward a package which provides 
additional  opportunities  for  company creation  and 
the  establishment 
to  ease 
growth.  Initiatives 
conditions  for  retail  outlets  have  been  launched. 
De-regulation  measures  have  been  proposed  for 
the  transport  sector  and  are  underway  for  gas 
markets.  

tightened.  In  addition, 

(4)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview Table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

 
 
                                                           
 
 
                                                           
2. Progress with the country-specific recommendations 

Table 2.1: 

Summary table on 2016 CSR assessment 

* This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. 
Source: European Commission 

9 

Finland Overall assessment of progress with 2016 CSRs: Some CSR 1: Achieve an annual fiscal adjustment of at least 0,5 % of GDP towards the medium-term budgetary objective in 2016 and 0,6 % in 2017. Use any windfall gains to accelerate the reduction of the general government debt ratio. Ensure timely adoption and implementation of the administrative reform with a view to better cost-effectiveness of social and healthcare services. Some progress in ensuring timely adoption and implementation of the administrative reform*     CSR 2:  While respecting the role of social partners, ensure that the wage setting system enhances local wage bargaining and removes rigidities, contributing to competitiveness and a more export industry-led approach. Increase incentives to accept work and ensure targeted and sufficient active labour market measures, including for people with a migrant background. Take measures to reduce regional and skills mismatches. (MIP relevant) Some progress  Substantial progress in ensuring that the wage setting system enhances local wage bargaining, removes rigidities and contributes to competitiveness   Some progress in increasing incentives to work   Some progress in ensuring targeted and sufficient active labour market measures, including for people with a migrant background  Some progress in addressing regional and skills mismatches CSR 3: Continue pursuing efforts to increase competition in services, including in retail. Promote entrepreneurship and investment, including by reducing administrative and regulatory burden, to foster growth of high value added production. (MIP relevant) Some progress  Some progress in increasing competition in services  Some progress in promoting entrepreneurship and investment   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Progress with the country-specific recommendations 

10 

 Box 2.1: Contribution of the EU budget to structural change in FinlandThe total allocation of the European Structural and Investment Funds (ESI Funds) in Finland amounts to EUR 3.8 billion under the current financial framework 2014-2020. This is equivalent to around 0.3 % of GDP annually (over 2014-2017) and 5 % of national public investment1. By 31 December 2016, an estimated EUR 1.8 billion, which represents about 49 % of the total allocation for ESI Funds, have already been allocated to concrete projects.  Financing under the European Fund for Strategic Investments, Horizon 2020, the Connecting Europe Facility (CEF) and other directly managed EU funds is additional to the ESI Funds. By end 2016, Finland has signed agreements for EUR 107.9 million for projects under the Connecting Europe Facility. The EIB Group approved financing under EFSI amounts to EUR 923 million, which is expected to trigger nearly EUR 2.8 billion in total investments (as of end 2016)..  All necessary reforms and strategies as required by the ex-ante conditionalities2 to ensure a timely and efficient up-take of the funds have been met thus ensuring a timely and efficient up-take of the funds.   All relevant CSRs were taken into account when designing the 2014-2020 programmes. The ESI Funds support the competitiveness, boost research and innovation, create employment as well as facilitate education and training.  ESI Funds address, for example, labour market access for young people, older workers as well as long-term unemployed, migrants and other vulnerable groups through different operations. For example implementation of the youth guarantee is partly funded by the ESI Funds through one-stop guidance centres. By December 2016, more than 9 000 young unemployed or outside of working life had been supported by measures financed by the ESF. In the area of research and innovation, ESI Funds support Finland in implementing its smart specialisation strategies. In all 19 regions over 1 000 enterprises are involved and will cooperate with research institutes in their areas of excellence.   https://cohesiondata.ec.europa.eu/countries/FI                                                            1 National public investment is defined as gross capital formation + investment grants + national expenditure on agriculture and fisheries 2At the adoption of programmes, Member States are required to comply with a number of ex-ante conditionalities, which aim at improving framework and investment conditions for the majority of areas of public investments. For Members States that do not fulfil all the ex-ante conditionalities by the end 2016, the Commission has the possibility to propose the temporary suspension of all or part of interim payments   
 
 
 
 
 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE MIP IN-

DEPTH REVIEW 

The  2017  Alert  Mechanism  Report  called  for 
further  in-depth  analysis  to  monitor  Finland's 
progress  in  the  evolution  of  the  imbalances 
identified  in  the  2016  MIP  cycle.  The  selection 
was motivated by the continued challenges related 
to  both  price  and  non-price  competitiveness  in  a 
context  of  sectoral  restructuring.  Furthermore, 
private  and  public  sector  indebtedness  is  high 
which could constitute a risk to the stability in the 
economy.  

The report provides the in-depth review of how 
the  imbalances  identified  have  developed.  The 
analysis 
under 
competitiveness  and  structural  change  (Section 
4.4.1), private sector debt (Section 4.2) and public 
debt (Section 4.1.1).  

particular 

found 

in 

is 

3.1. 

IMBALANCES AND THEIR GRAVITY 

Export market shares fell in 2015 mainly due to 
weak  performance  in  the  trade  of  goods.  The 
cumulative  loss  of  export  market  shares  in  2011-
2015  is  estimated  at  about  20 %,  which  is  one  of 
the largest in the EU. The decline has been driven 
by  cumulative  losses  of  competitiveness  and  the 
ongoing structural change in the economy and the 
sensitivity  of  exports 
the  weak  Russian 
economy.  Moreover,  Finnish  exports  focus  on 
intermediate and investment goods, which make it 
vulnerable  to  economic  swings  when  investments 
decline.  

to 

Structural change in industry has slowed down. 
The  rapid  downsizing  of  forest  and  electronics 
industries  is  over,  but  no  other  industry  has 
emerged  as  clearly  taking  the  leading  role  in 
economic  recovery.  Manufacturing  has  lost  about 
one  fifth  of  its  jobs  and  close  to  one  third  of  its 
gross  value  added  since  the  crisis.  Consequently, 
aggregate labour productivity has fallen.  

Private  sector  debt  remains  high,  at  about 
155 %  of  GDP 
in  2015.  The  households' 
debt-to-GDP  ratio  stood  at  67 %  while  non-
financial corporations' debt was about 89 %. Non-
financial  corporations'  debt  increased  in  2015 
partly due to loan arrangements between domestic 

parent  companies  and  their  daughter  companies 
abroad.  

Households'  debt  has  increased  to  112 %  of 
their  gross  disposable  income.  The  European 
Systemic  Risk  Board  issued  a  formal  warning  to 
Finland  in  2016,  highlighting  the  high  level  of 
indebtedness and the associated vulnerabilities. At 
the same time, as most mortgage loans are tied to 
rates,  households' 
interest 
market 
average  interest  rate  expenditure  has  fallen  to  a 
record low 0.4 % of gross disposable income. The 
share  of  non-performing  loans  in  the  total  loan 
stock,  at  1.2  %  in  mid-2016,  is  the  lowest  in  the 
EU.  The  elevated  private  indebtedness,  especially 
households'  debt,  could  reduce  the  economy's 
resilience to macroeconomic shocks. 

reference 

Public  debt  has  increased  since  the  beginning  of 
the  crisis  and  is  now  above  the  60 % of GDP 
Treaty  reference  value  but  is  set  to  stabilise  at  a 
level below 70 %.  

The  financial  sector  is  well  capitalised  and 
shielded against risks even if vulnerabilities such 
as  high  concentration,  dependency  on  wholesale 
market  funding  and  cross-border  connections  to 
the  Nordic  and  Baltic  banking  sector,  remain  (see 
also country reports for Sweden 2016 and 2017).  

The solid position of the banking sector reduces 
macro  stability  risks  from  private  sector  debt. 
Furthermore, 
in  a  Nordic  context,  Finnish 
households'  debt-to-income  ratio  is  not  extremely 
high  and  given  fixed  monthly  mortgage payments 
most  households  are  protected 
future 
normalisation of reference market interest rates for 
mortgages. 

from 

3.2. 

EVOLUTION, PROSPECTS, AND POLICY 
RESPONSES 

shares  as 

Finland  is  expected  to  continue  losing  export 
market 
the 
manufacturing  sector  remains  relatively  weak. 
2016  is  expected  to  have  been  a  turning  point  in 
exports and manufacturing sector production.  

the  outlook 

in 

11 

 
 
3. Summary of the main findings from the MIP in-depth review 

interest payments in personal income taxation and 
a  loan-to-value  cap  as  of  July  2016,  will  have  a 
curbing  effect  on  households'  borrowing.  Despite 
this,  households  are  not  expected  to  deleverage 
given  the  favourable  borrowing  conditions.  The 
households'  debt-to-disposable  income  ratio  could 
continue  to  rise  as  income  growth  is  projected  to 
remain  limited  given  the  wage  freeze  under  the 
Competitiveness Pact.  

Public  sector  debt  is  expected  to  increase 
further,  driven  up  by  the  costs  of  an  ageing 
population. The Finnish government is committed 
to consolidating public finances as outlined in the 
government programme of 2015. According to the 
government's fiscal strategy, debt would be put on 
a  downward  trend  in  2019.  The  2017  pension 
reform  and  the  ongoing  reform  of  healthcare  and 
social  services  will  help  reduce  the  medium-term 
sustainability risk. 

3.3.  OVERALL ASSESSMENT 

Sources of imbalances identified in Finland are 
linked  to  competitiveness  losses  in  a  context  of 
sectoral  restructuring  and  relatively  high 
private  sector  debt.  Competitiveness  losses  are 
the  result  of  major  sector  restructuring  affecting 
the growth potential and are reflected in protracted 
market  share  losses.  Government  debt  has  been 
growing since after the crisis. 

implications  because  of 

limited 
These  developments  had  however 
macro-stability 
the 
strength  of  the  financial  sector.  High  levels  of 
private  debt  did  not  lead  to  a  deterioration  of 
banks'  balance  sheets  and  the  share  of  non-
performing loans remains very limited.  

The  post-crisis  potential  growth  slowdown  is 
likely  to  be  partly  persistent  but  signs  of 
recovery are present. Potential growth has fallen 
post-crisis  and  is  not  expected  to  return  to  pre-
crisis  growth  rates  in  the  medium  term  as  growth 
of  labour  productivity  is  expected  to  remain 
subdued. Losses in export market shares and costs 
competitiveness have decelerated. Private debt as a 
share  of  GDP  is  rising  but  a  slower  rate,  both  for 
households. 
non-financial 
Government  debt  is  expected  to  grow  at  a 
decelerated pace over the 2016-2018 period and to 
be stabilised afterwards.  

corporations 

and 

to 

improve 

from  2018 

in  2017  due 

setting  practices 

The cumulated loss of competitiveness has been 
is 
partly  addressed.  Cost  competitiveness 
expected 
the 
to 
Competitiveness Pact, but the lack of agreement on 
wage 
create 
uncertainty about future developments. If the new 
wage  setting  practices  or  so  called  Finnish  model 
it  will  deliver  nominal  wage 
is  successful, 
increases  that  take  into  account  competitiveness 
and  productivity  developments  so  that  workers 
purchasing  power  is  guaranteed  while  exporting 
companies 
local 
possibilities  to  apply  the  sector  level  agreements, 
as  agreed 
the  Competitiveness  Pact  (for 
organised  employers)  employers  have  more  room 
to adjust to economically difficult times. Non-cost 
slow 
challenges, 
competitiveness 
productivity growth, continue to hamper economic 
performance and export growth, but lively start-up 
activities  should  imply  that  the  fundamentals  for 
doing business are broadly in a good shape. 

thrive.  With 

enhanced 

including 

in 

Non-cost  competitiveness  acts  as  a  drag  on 
export  performance.  Many  features  of 
the 
economy,  such  as  the  skilled  labour  force  or  the 
favourable  and  stable  business  environment, 
should  make  Finland  well  placed  to  reap  the 
benefits  of  world  growth.  However,  this  does  not 
yet  seem  to  be  the  case.  That  said,  the  rapid 
emergence  of  start-up  companies  might  pave  the 
way  to  more  diversified  exports.  And  Russia's 
expected  economic  recovery  from  2017  could 
bring  about  a  positive  risk  to  Finland's  economic 
outlook in the coming years.  

is  unfolding,  but 

Structural  change 
the 
reorientation of the economy might have slowed 
down  recently.  After  a  decline  in  electronics 
production,  ICT  services  have  become  more 
important  in  service  exports.  The  government 
continues  to  support  start-ups  through  its  growth 
programmes.  Policies  to  support  start-ups  and  the 
internationalisation  of  SMEs  are  in  place,  but 
might not be able to bring about a rapid change in 
the  structure  of  the  economy  or  export  market 
shares in the short run. 

Private  sector  debt  is  expected  to  remain  high 
but stable. Non-financial corporations may reduce 
debt  in  the  coming  years  for  example  due  to 
increased 
the 
Competitiveness Pact. The recent policy measures, 
i.e.  phasing  out  the  deductibility  of  mortgage 

profitability 

thanks 

to 

12 

 
3. Summary of the main findings from the MIP in-depth review 

Table 3.1: 

MIP Assessment Matrix (*)  Finland 2017 

The  government  has  shown  determination  to 
restore  the  competitiveness  of  the  economy. 
Following  a  strong  push  from  the  government, 
social partners agreed on measures to improve cost 
competitiveness  especially  on  the  front  of  labour 

costs  and  to  enhance  the  resilience  of  firms 
through  more  flexible  wage  setting  practices. 
Measures  have  been  taken  also  to  contain  the 
incentives for taking up excessive mortgage debt. 

(Continued on the next page) 

13 

Gravity of the challengeEvolution and prospectsPolicy responsesCompetitivenessThelossofcompetitivenesshasledtoalossinFinland'sexportmarketshares,whichfellby6.6%in2015.Thecumulativelossofexportmarketsharesinthefiveyearsto2015was20.5%whilemarketshareshaddeclinedsignificantlyalreadybeforethen.ThiscontributedtonegativeormodestGDP growth and job losses.In2015themarketsharelossacceleratedasrealgoodsexportsfellby2.2%butin2016exportsareexpectedtohavegrownagain.From2017,improvedcostcompetitivenessisexpectedtosupport export growth. TheCompetitivenessPactincludesmeasuresthatareexpectedtolowerwagecostsby4%.SocialpartnerssignedthePactinsummer2016and it comes into effect as of 2017.  Thechangeinnominalunitlabourcostsoverthepastthreeyearswas3.6%cumulatively.Since2005Finland'snominalunitlabourcostshaveincreasedcumulativelybyabout28%whileineuroarea,unitlabourcostsincreasedonaverageby about 16%. In2015nominalunitlabourcostsincreasedonlyby1%andtheyareexpectedtoincreaseby0.6%thisyear.In2017unitlabourcostsareexpectedtofallby1.2%inaccordancewiththeCompetitiveness Pact. In2017,negotiatedwageswillbefrozenandannualworkingtimeincreasesby24hourswithoutcompensation. Highproductivitysectorshavedeclinedandtheshareoflow-productivityservicesintheeconomycontinuestoincrease,leadingtonegativeorlowaggregate productivity growth.Thegovernment'sentrepreneurpackageincludeasubsidyforone-personcompaniestohireaworker,areforminunemploymentinsurancetomakeitmoreconducivetobecominganentrepreneur,areviewofmeasuresthatguidetherecruitmentofforeignspecialistsandthecreationofpublicdatabaseofinventionsthateveryonecanaccessandexploit. Themanufacturingindustrieshavelostabout87000jobsor21%since2008;in2015realvalueaddedwasabout30%below2008level.Paperandelectronicsaccountforbulkofthelossesofvalueadded,butalsoothertechnologyindustrieshavereduced staff and production.Overtherecentyears,thedeclineinmanufacturinghassloweddownandisexpectedtohavebottomedoutin2016.Theoutlookfor2017looks positive but tepid.TheInnovationvouncherwaslaunchedin2016topromoteinnovationandproductdevelopment among SMEs. Private and public sector debtPrivatesectordebtamountedto155.7% of GDP in 2015.Inearly2016theNFCturnedintopassivedeleveragingmodewhileincreaseinthedebt-to-GDPratiohasrecentlysloweddown.Overall,theprivatesectordebtratioisexpectedtohavestabilisedin2016. In2016FIN-FSAintroducedamaximumloan-to-valueratioof90%forhousingloans(95%forfirst time buyers).Imbalances  
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

(*) The first column summarises "gravity" issues which aim at providing an order of magnitude of the level of imbalances. The 
second column reports findings concerning the "evolution and prospects" of imbalances. The third column reports recent and 
planned relevant measures. Findings are reported for each source of imbalance and adjustment issue. The final three 
paragraphs of the matrix summarise the overall challenges, in terms of their gravity, developments and prospects, policy 
response. 
Source: European Commission 

14 

Households'debt-to-grossdisposableincomewas112.3%in2015.Households'debt-to-GDPratiowas66.9%andhouseholds'net-financialassetpositionwas72% of GDP in 2015.Nominalhouseprices,themaindriverforhouseholds'debt,havebeenratherflatovertherecentyears.Inrealterms,housepriceshavebeengraduallydeclining.Increasingactivityinconstructionandthelatesthousepricedatapointtograduallyincreasingnominalpricesintheshort-run.However,housepricesinthecapitalcityregionaresignificantlyhigherthanintherestofthecountryandhavealsocontinuedtoincrease. A10%minimumlevelfortheaverageriskweightonhousingloanswillbeintroducedonJuly2017atthelatestforbanksthathaveadoptedtheInternalRatingsBased Approach.Givenfixedmonthlymortgagepayments,mosthouseholdsareprotectedfromfuturenormalisationofreferencemarketinterest rates for mortgages.TheFinnishbankingsystemhasremainedwellcapitalisedandfairlyprofitabledespitetheoverallweakness,andtheshareofnon-performingloansisamongthelowest in the EU. Non-financialcorporations'(non-consolidated) debt was about 116% ofGDPandtheirnetfinancialassetpositionstoodat-128.9%in2015.Non-financialcorporationsincreasedtheirforeignlendingin2015butanotablepartoftheincreaseddebtconsistedofintra-group loans. Publicdebtwas63.5%ofGDPin2015.Thedebthasincreasedsince2008andisexpectedtoriseto66.5%ofGDP by 2018. Thegovernmentprogrammeoutlinesconsolidationmeasuresfor2016-2019andhasatargetofputtingthegovernmentdebt-to-GDPratioonadownwardpathasof 2019.Conclusions from IDR analysis●Finlandhasexperiencedcompetitivenesslossesinacontextofsectoralrestructuringandincreasingdebtintheprivatesector.Governmentdebthasalsoincreased,thoughremainingbeloweuro-areaaverage.Growthremainsweakinacontextofsubduedexportdemand.Despitehighprivatedebt,thefinancial sector is well capitalised and the level of NPLs among the lowest in the EU.●Followingastrongpushfromthegovernment,socialpartnersagreedonmeasurestoimprovecostcompetitivenessespeciallyonthefrontoflabourcostsandtoenhancetheresilienceoffirmsthroughmoreflexiblewagesettingpractices.Measureshavebeentakenalsotocontaintheincentivesfortaking up excessive mortgage debt.●Lossesinexportmarketsharesandcostscompetitivenesshavedecelerated.PrivatedebtasashareofGDPisrisingbutaslowerrate,bothfornon-financialcorporationsandhouseholds.Governmentdebtisexpectedtocontinuetoincreaseoverthe2016-2018periodataslowingpaceonthebackofimproving budgetary figures. 
 
 
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

related pension system was 1.3 % of GDP in 2015. 
.  According  to  the  OECD  statistics (6),  Finland’s 
general  government  net  financial  assets  are 
expected  to  amount  to  52.0 %  of  GDP  in  2016, 
second  highest  among  the  OECD  countries  (most 
countries have large net liabilities). 

Graph 4.1.2:  General government expenditure by function 

and revenue (% of GDP) 

4.1.1.  FISCAL POLICY* (5) 

Finland's public debt has increased from about 
30%  in  2007  to  above  60%  in  2016.  Policy 
makers  have  faced  the  difficult  task  of  striking  a 
balance between the need to respect the fiscal rules 
and  the  need  to  support  economic  growth  during 
the  years  of recession or very  low  growth.  In  this 
period,  the  medium-term  budgetary  objective  was 
mostly not met. Instead, the country cushioned the 
rapid fall in revenues by borrowing (Graph 4.1.1). 
The  Commission  forecasts  the  debt-to-GDP  ratio 
to increase also in 2016-2018.  

Graph 4.1.1:  General government deficit 2002-2015, 

% of GDP 

Source: Statistics Finland 

from 

Risks to the development of the gross debt ratio 
stem  mainly 
the  macroeconomic 
developments,  low  real  and  nominal  growth. 
Risks  related  to  various  guarantees  issued  by  the 
government seem contained as these are related to 
a  large  number  of  diverse  companies  and  not 
concentrated to particular companies or sectors. 

4.1.2.  LONG-TERM SUSTAINABILITY 

Fiscal  sustainability  analysis  points  to  a  high 
sustainability  challenge  over  the  medium  term. 
Based on the Debt Sustainability Monitor, Finland 
does  not  appear  to  face  risks  of  fiscal  stress  over 
the  short  term  (within  one  year).  Over  the  long- 
term, it can be classified as a medium risk country 
(European  Commission  2017).  The  medium-term 
risk  is  however  high,  because  under  the  baseline 
scenario, 
should 
structural  primary  balance 
improve by 2.1 pps over 5 (post-forecast) years to 
reach  a  60 %  public  debt-to-GDP  ratio  by  2031. 
This rather high adjustment requirement takes into 
account  the  current  debt  level  and  the  required 
financing  for  additional  expenditure  arising  from 

(6)  Statistical  annex  of  the  OECD  Economic  Outlook  (June 

2016) 

Source: National Accounts 

Public debt has increased due to relatively high 
primary deficits and because the pension funds 
that  have  budgetary  surplus  do  not  invest  into 
government  debt.  Primary  deficits  have  resulted 
from a fall in government revenues after the crises 
while expenditures kept growing, driven by social 
protection 
stock-flow 
and  healthcare.  The 
adjustment  is  driven  by  the  fact  that  the  statutory 
earnings-related pension system within the general 
government  sector  is  partially  pre-funded  and  in 
surplus.  The  surplus  of  the  statutory  earnings-

(5)  An  asterisk  indicates  that  the  analysis  in  the  section 
contributes  to  the  in-depth  review  under  the  MIP  (see 
Section 3 for an overall summary of main findings). 

15 

-8-6-4-20246Central governmentLocal governmentSocial security fundsGeneral government010203040506070Social protectionEducationHealthOtherEconomic affairsGeneral publicservicesRevenue 
 
 
                                                           
 
                                                           
4.1. Public finances and taxation 

freedom  of  choice  in  a  way  which  does  not 
increase  costs  or  result  in  cherry-picking  of  easy-
to-treat  patients.  Different  models  of  freedom  of 
choice will be piloted in five areas in 2017. 

The reform is expected to also address some of 
the existing challenges related to the social care 
system. Access to services is currently uneven and 
the  proportion  of  people  reporting  unmet  medical 
care needs due to the waiting time is far above the 
EU average (3.2 % in Finland vs 1.1 % in the EU). 
The  current  organisation  of  the  healthcare  system 
results  in  a  strong  contrast  between  occupational 
healthcare  with  fast  access  and  public  healthcare 
with long waiting lists. At the same time the need 
for  social  and  health  services  is  growing  as  the 
population  ages.  The  occupational  health  care 
system is envisaged to remain in place in the new 
system.  The  Finnish  long-term  care  (social  care) 
system  faces  serious  challenges  such  as  the  high 
demand for care, the need to ensure that resources 
are  directed  at  those  that  need  care  the  most  and 
can least afford it, and fragmented governance. 

the 

local 
The  reform  will  also  change 
administration system. It will shift responsibility 
and  resources  from  the  municipalities  to  the 
counties  that  will  be  created  on  top  of  the 
municipalities.  A  high  number  of  employees  will 
be  transferred  from  the  municipalities  to  the  new 
counties.  The  counties  have  also  other  duties  in 
addition  to  social  and  health  tasks  such  as 
organising  the  public  employment  services  in 
addition to social and healthcare related tasks. The 
funding  will  come  in  the  form  of  government 
transfers  as  the  counties  will  not  be  able  to  levy 
taxes. As employment shifts from municipalities to 
the  regions,  the  capability  of  municipalities  is 
likely  to  be  at  least  temporarily  weakened.  A 
temporary  administration  will  start  preparing  the 
launch of activities in July 2017, when laws come 
the 
into  force  following 
parliament  process  expected  to  last  until  spring 
2017.  Elections  for  the  new  county  councils  will 
be  held  in  the  spring  2018  and  the  new  counties 
will start to operate from the beginning of 2019. 

the  completion  of 

4.1.3.  FISCAL FRAMEWORKS 

The central government fiscal framework is tied 
to multiannual expenditure ceilings. To date, the 
framework  has  proved  to  be  effective.  At  the 

an  ageing  population.  The  debt  sustainability 
analysis  shows  that  the  debt  ratio  would  be  still 
increasing  at  the  end  of  the  10-year  projection 
period  under  all  sensitivity  test  scenarios.  The 
probability of debt ratio being higher in 2021 than 
in 2016 is 80 %.  

The  existing  sustainability  challenges  are  well 
recognised  by  policymakers  and  measures  to 
address  them  have  been  adopted  or  are  being 
discussed.  From  January  2017,  a  pension  reform 
will  enter  into  force.  The  earliest  pensionable  age 
will  increase  from  the  current  63  years  by  3 
months  for  each  age  cohort,  until  it  reaches  65 
years  in  2027.  Thereafter  the  link  with  life 
expectancy  will  be  introduced,  so  that  the  time 
spent  working  in  relation  to  the  time  spent  in 
retirement  will  be  fixed  at  the  2025  level.  The 
national authorities project that the pension reform 
will have a positive annual growth impact of 0.1 % 
on  GDP  from  2020  onwards,  as  the  supply  of 
labour  increases.  The  direct  fiscal  effect  on  the 
primary balance is projected to be  -0.1 % in 2017 
(due  to  the  lowering  of  pension  contributions). 
However  the  total  positive  impact  upon  primary 
balance  is  expected  to  reach  0.6 %  by  2030.  It  is 
estimated  by  the  national  authorities  that  the 
reform will lower the S2 sustainability indicator by 
1pp. 

The  reform  of  social  and  health  services  is 
expected  to  increase  the  sustainability  of  the 
health and social system. Pressure on costs arises 
from the ageing population. The main objective of 
the  reform  is  to  secure  the  delivery  and  adequate 
access to health and social services while keeping 
cost  increases  under  control.  Although  the  reform 
will  not  provide  immediate  savings,  it  has  the 
potential to curb the speed of expenditure increases 
(currently  health  care  expenditure  grows  at  2.4 % 
in real terms per year and the reform would reduce 
the  growth  to 0.9 %). All responsibility  for  health 
and  social  will  shift from  the  municipalities  to  18 
counties  from  1 January  2019.  The  first  batch  of 
draft  bills  went  through  public  consultation  in 
autumn  2016. The draft  legislation  to  regulate  the 
freedom  of  choice  for  the  patients,  is  now 
undergoing  public  consultation.  The  new  system 
separates  the  organisation  and  provision  of  health 
services  and  will  allow  patients  to  choose  their 
social  and  health  care  providers  from  public, 
private  and  third  sector  service  providers.  There 
could be considerable challenges in organising the 

16 

 
4.1. Public finances and taxation 

shift from labour towards more growth-friendly tax 
bases. 

to 

increase 

reform  measures 

Personal  income  tax,  employer  and  employee 
social contributions are to be reduced as part of 
the 
cost-
competitiveness. Personal income tax cuts will be 
implemented  through  cuts  of  all  tax  rates  and 
through  increased  deductibility  of  earnings  from 
taxable  expenditure.  However,  assessments  of  a 
package  of  various  tax  measures  show  that  the 
impact  on  the  disposable  income  will  be  the 
smallest among low income earners and is likely to 
have  no  impact  on  inequality.  (8)  The  measures 
lead to a fall in general government revenues as of 
2017 but the Competitiveness Pact also eases cost 
pressures in the public sector. 

Securing  investment  that  meets  the  long-term 
needs  of  the  economy  remains  a  challenge. 
While investment levels remain slightly above the 
EU  average,  they  have  been  declining  during  the 
recent years. The share of private investment is on 
average  lower  than  elsewhere  in  the  EU.  The 
Ministry of Finance has appointed an expert group 
to  review  the  level  and  structure  of  corporate 
taxation  to  assess  how  it  could  best  contribute  to 
competitiveness,  growth  and  productivity.  The 
mandate  of  the  expert  group  covered  various 
aspects  of  corporate  taxation,  including  its  impact 
on financing, investment and R&D. The group will 
also  review  the  economic  effects  of  taxation  of 
dividends  and  other  taxes  on  financial  products. 
The group’s work will be supported by a research 
project  coordinated  by  the  VATT  and  ETLA 
research centres. The researchers have produced a 
report analysing the various options to improve the 
system (Prime Minister’s Office 2016). The report 
should  be  finalised  by  the  end  of  2017  and  is 
expected 
policy 
recommendations.  

specific 

include 

to 

to 

term, 

the  government’s 

beginning  of 
the 
expenditure  ceilings  are  set  for  a  four  year period 
according 
the  government’s  fiscal  policy. 
Thereafter, each spring the government updates the 
limits  on  central  government  spending  for  the 
remaining  years  of  its  term,  establishing  the 
multiannual financial framework.  The  ceilings  are 
set  in  real terms.  The  framework  includes built-in 
automatic  stabilisers,  as  some  spending,  such  as 
unemployment  expenditure  or  interest  payments, 
falls outside its scope. 

Neither nominal-balanced-budget requirements 
nor limits on annual deficits are included in the 
legislation. Following the ratification of the fiscal 
compact, a structural balance rule has been turned 
into  national  legislation.  In  autumn  2016,  the 
government initiated legislative changes to remove 
government  discretion  on  whether  to  launch  the 
automatic  correction  and  implement  the  ‘comply 
or  explain’  principle,  so  that  the  government  will 
in  the  future  need  to  automatically  respond  to  the 
observations of the Fiscal Council. 

in  particular 

the  compliance  with 

The  National  Audit  Office  has  been  entrusted 
with  the  responsibilities  of  the  Fiscal  Council 
while 
the  Ministry  of  Finance  remains 
responsible  for  forecasting.  The  National  Audit 
Office  monitors  the  implementation  of  the  fiscal 
the 
rules, 
medium-term 
The 
macroeconomic  forecasts  underlying  the  stability 
programme  and  the  draft  annual  budget  are 
prepared  by  the  Department  of  Economics  within 
the  Ministry  of  Finance.  Finland  is  the  only  euro 
area  Member  State  that  has  designated  a  Ministry 
of Finance department as the independent forecast 
producer referred to in the two pack(7). 

budgetary 

objective. 

4.1.4.  TAXATION 

Finland  remains  a  relatively  high  tax  country. 
In 2015, the tax burden was about 44.1 % of GDP, 
slightly higher than in 2014 when it was at 44.0 %. 
In  2016,  the  tax  burden  is  expected  to  be  broadly 
unchanged.  The  2017  budget 
tax 
measures which are expected to contribute to a tax 

includes 

(7)  A  pair  of  regulations  that  apply  to  euro  area  Member 
States.  They  strengthen  economic  coordination  by 
requiring  Member  States  to  submit  draft  budgetary  plans 
and introduce enhanced surveillance for those facing severe 
financial difficulties. 

Some features of the tax system may discourage 
companies  from  growing.  Under  Finnish  tax 
legislation  85 %  of  dividends  received  from 
publicly  listed  companies  are  taxable  income  for 
the shareholder. The taxation of dividends received 
from  non-listed  companies  however  depends  on 
the net assets that a company holds. As long as the 

(8)  Legislative  proposal  HE  135/2016  Hallituksen  esitys 
eduskunnalle  vuoden  2017  tuloveroasteikkolaiksi  sekä 
laiksi tuloverolain muuttamisesta 

17 

 
                                                           
                                                           
4.1. Public finances and taxation 

dividend  remains  below  8 %  of  net  assets  and 
below  150 000  euros,  75 %  of  this  dividend  is 
considered  to  be  non-taxable  revenue.  The  tax-
exempt  part  falls  to  25  %  as  regards  dividends 
exceeding  8  %  of  net  assets.  If  the  dividend 
remains  below  8  %  of  net  assets  but  exceeds  150 
000  euros,  the  tax-exempt  part  is  15  %.  Such 
artificial  thresholds  may  provide  incentives  to 
engineer  the  capital  position  of  the  company  and 
the  amount  of  dividends  paid  so  that  the  tax 
advantage  can  be  used  to  the  maximum  (ETLA 
2014).  It  may  also  discourage  companies  from 
growing  and/or  listing  their  shares  on  a  stock 
exchange.  

Environmentally-harmful  subsidies  remain  in 
place  in  the  traditional  sectors of  the  economy. 
Most  of  these  subsidies  are  provided  through  the 
tax system in the form of exemptions and reduced 
rates  on  specific  industrial  activities  and  fuels. 
Their  annual  impact  has  been  estimated  by  the 
Ministry of Environment, in co-operation with the 
Ministry of Finance, at 1.5 % to 2 % of GDP. The 
government  reintroduced  as  of  2017,  tax  refunds 
for  the  mining  industry  which  were  removed  in 
2015. In addition, the government has proposed to 
introduce  a  new  subsidy  to  compensate  energy 
intensive  industries  for  indirect  expenses  incurred 
from  emissions  trading.  From  2017  to  2019,  the 
net  annual  revenue  impact  of  this  new  subsidy  is 
expected  to  amount  to  43  million  euros  per  year 
and reach 46 million euros in 2020. The revenues 
from  environmental  taxation  are  above  the  EU 
average,  but are  on  a decreasing  trend (see Graph 
4.1.3). 

Graph 4.1.3:  Share of environmental taxes in GDP, selected 

EU countries 

Source: European Commission 

18 

1.802.302.803.303.804.304.802005200620072008200920102011201220132014EUDenmarkGermanyItalyNetherlandsFinlandSweden 
 
 
 
4.2.  FINANCIAL SECTOR 

4.2.1.  BANKING SECTOR 

risks 
to 
the  high 

The  Finnish  banking  system  has  remained 
strong  and  stable  despite  the  overall  weakness 
in the economy and the record low interest rate 
financial 
environment.  Short-term 
stability  are 
level  of 
low  despite 
households’  indebtedness.  Finnish  lenders  remain 
remarkably  well  capitalised  and  have  high  loss 
absorption  capacity.  Their  asset  quality  is  among 
the highest in the EU. The banking sector is large 
and  concentrated:  the  assets  are  equal  to  about 
300 % of GDP and the three largest banks control 
the market. Areas that remain potential sources of 
risk  are  the  strong  regional  interconnections  with 
other  Nordic  and  Baltic  countries  and 
the 
dependence on wholesale funding. 

Lending  to  the  private  sector  remains  on  a 
stable  growth  trend.  In  general,  the  banking 
system  has  rapidly  passed  on  the  record  low 
interest  rates  to  the  real  economy.  By  June  2016 
lending to firms grew by 4.2 % year-on-year, while 
the  mortgage  loans  segment  increased  by  2.6 % 
year-on-year.  These  positive  credit  developments 
levels  of  consumer 
also 
confidence, 
increasingly 
particular 
favourable  view  of  consumers  regarding  their 
personal  finances  and  expectations  about  future 
purchases, which has supported retail sales and the 
housing market in 2016. 

improving 
in 

reflect 

an 

Table 4.2.1:  Key banking sector indicators 

Source: ECB, CBD 

a 

entails 

funding 

The  relatively  high  reliance  of  banks  on 
contingent 
wholesale 
refinancing  risk.  Finnish  banks  rely  heavily  on 
wholesale funding and, alongside the public sector, 
are  the  largest  issuers  of  debt  securities.  The 
is 
banking  system-wide 
relatively  high  at  close  to  140 %.  The  share  of 
private  sector  deposits  in  the  domestic  banking 
system  represents  34 %  of  total  liabilities  and  is 
much lower than the euro area’ average of 54 %. It 
is compensated by the system’s higher reliance on 
debt issuance (market funding), external liabilities 

loan-to-deposit 

ratio 

(mainly 

liabilities 

the  euro  area)  and 
(market  funding  outside 
remaining 
the  derivative 
portfolio  of  the  Nordea  group).  Banks  maintain 
large portfolios of liquid assets available for sale to 
generate  emergency  cash.  Wholesale  funding, 
especially  with  short  term  and  foreign  currency 
instruments,  may  be  a  volatile  funding  source,  in 
particular  during  adverse  market  conditions. 
However, banks can have strategies to mitigate this 
risk such as liquidity buffers.  

low 

Financial  soundness  indicators  show  that  the 
financial  system  is  in  good  condition.  This  is 
despite 
the  difficult 
interest  rates  and 
macroeconomic  environment.  Banks  are  well 
capitalised:  at  the  end  of  2015  the  average  Tier  1 
capital ratio was 22.4 %, one of the highest in the 
EU. Tier 1 instruments account for the majority of 
the  capital  (see  Table  4.2.1)  on  the  system’s 
aggregate  balance  sheet.  The  high  level  of  capital 
was also reflected in the good results achieved by 
the largest banks operating in Finland in the 2016 
European Banking Authority stress test, where the 
capital levels of the largest lenders remained good 
in both the baseline and in the stress scenario. The 
average  quality  of  bank  assets  is  very  high  in 
comparison to other EU countries: the ratio of non-
performing  loans  to gross  loans  was  just  1.3 %  in 
December 2015 whereas the EU average was close 
to  6 %.  The  sector  also  performs  well  in  terms  of 
profitability. In 2015, return on equity (8.3 %) and 
return on assets (0.5 %) were much above the euro 
area  average  (4.4  %  and  0.3  %,  respectively). 
Nonetheless,  the  exceptionally  low  interest  rate 
level  puts  a  strain  on  banks’  net  interest  income, 
typically  the  core  item  in  banks’  profits  –  the  net 
interest  income  dropped  by  about  5 %  from  the 
2014  level  in  2015.  However,  the  Finnish  banks 
have  controlled  their  costs  more  efficiently  than 
their euro area peers. 

At  the  beginning  of  2017,  Nordea  Bank,  a 
Swedish bank, converted its Nordic subsidiaries 
into  branches.  The  local  Nordea  Banks  are 
systemically  important  in  each  of  the  four  Nordic 
countries. From now on, the supervision of Nordea 
Bank  Finland  is  the  responsibility  of  Sweden’s 
financial supervisory authority. In Finland, Nordea 
is one of the biggest banks, with a market share of 
close to 30 % in lending and deposit taking. Unless 
there 
the 
Finnish  and  Swedish  supervisors,  the  change  may 
seriously  constrain  the  Finnish  authorities’  insight 

increased  collaboration  between 

is 

19 

201020112012201320142015Non-performing loans0.90.80.80.71.41.3Coverage ratio----36.037.9Loan-to-deposit ratio*139.3142.3139.9139.2139.6136.7Tier 1 ratio14.715.218.116.916.622.4Return on equity6.87.68.98.19.18.3 
 
 
 
 
4.2. Financial sector 

traditional  growth-company 

roughly  doubled  to  about  150 million  euros  in 
2016.  The  Crowdfunding  Act,  regulating  the 
market,  came  into  force  in  September  2016.  In 
financing, 
more 
venture  capital  investment  was  122 million  euros  
in  2015  (FVCA,  2016).  As  a  share  of  GDP, 
venture capital investment in Finland is one of the 
highest  in  the  EU  and  twice  as  high  as  the  EU 
average.  While  SMEs  depend  mainly  on  equity 
and bank financing, big corporations have a wider 
variety  of  financing  at  their  disposal.  Overall, 
market  debt funding of  non-financial  corporations 
increased  until  2013,  when  it  reached  18 %  of 
GDP,  but  fell  during  the  subsequent  years  to 
31 billion  euros  or  15 %  of  GDP  in  2015,  just 
below the EU average. 

SMEs’  access  to  finance  is  good.  Following  a 
decline of more than 40 % from 2008 to 2014  — 
due  to  lower  demand,  tighter  credit  conditions, 
solvency  problems  in  some  companies,  and  other 
factors  —  lending  to  SMEs  grew  by  26  %  from 
2014  to  2015,  reaching  the  highest  proportion  of 
total bank lending since 2007. Recently, the stock 
of  long-term  loans  to  non-financial  corporations 
has  been  increasing  faster  than  shorter  maturity 
loans, indicating that SMEs borrow for investment 
rather  than  for  working  capital  (see  Graph  4.2.2). 
Despite  the  good  overall  picture,  some  obstacles 
such  as  lack  of  collateral  might  prevent  some 
SMEs  from  using  external  financing.  In  a  recent 
survey, 10 % of SMEs signalled that they had not 
applied for financing during the past year although 
they would have needed it (10) (Yrittäjät, 2016).  

The public sector complements market funding. 
The  government  growth  financing  and  export 
the 
guarantee  vehicle  Finnvera  complements 
supply of finance for SMEs, providing funding for 
expansion  and  internationalisation.  Recently  the 
government  has  directed  more  resources  towards 
start-ups and SMEs via Finnvera and increased the 
fund’s capacity for export guarantees. Roughly one 
SME  in  five  turns  to  Finnvera  rather  than  the 
banking  system  for  financing  (Yrittäjät,  2016). 
low  cost 
However,  given 
financing,  not  all  economically  or  financially 
unviable  companies  exit 
the  market.  These 
companies continue to tie up capital and the labour 

the  abundant  or 

(10)  In the same survey, only 4 % of respondents indicated that 
they  had  received  a  negative  financing  decision  on  their 
loan application. 

the  Nordic 

into  the  business  of  one  of  the  largest  financial 
institutions  in  the  country,  and  its  ability  to  carry 
out  macroprudential  policy.  To  deal  with  the  new 
supervision 
situation, 
the  ECB  have  agreed  on 
authorities  and 
information  sharing, 
arrangements  concerning 
supervisory 
cooperation, 
macroprudential  policy,  depositor  protection  and 
recovery and resolution planning (9). 

responsibility 

financial 

and 

Graph 4.2.1:  Banks’ costs-to-income ratio, % 

Source: European Commission 

4.2.2.  ACCESS TO FINANCE 

Equity  is  the  main  source  of  financing  for 
Finnish  companies.  Nasdaq  Helsinki  Oy  stock 
exchange,  which  is  part  of  the  Nordic  OMX-
Nasdaq  exchange,  is very deep.  In  2015,  the  total 
stock of listed shares issued by firms increased to 
74 %  of  GDP  from  68 %  in  the  previous  year 
Recently crowdfunding has gained popularity. The 
Ministry  of  Finance  estimates  that  crowdfunding 

(9)  Memorandum 

of 

Understanding 

between 
Finansinspektionen  (Sweden),  Finanstilsynet  (Norway), 
Finanstilsynet  (Denmark),  Finanssivalvonta  (Finland)  and 
the  ECB  on  prudential  supervision  of  significant  branches 
in Sweden, Norway, Denmark and Finland of 2 December 
the 
2016;  Memorandum  of  Understanding  between 
Finnish, Norwegian and Swedish Ministries of Finance and 
the  Danish  Ministry  of  Business  on  cooperation  regarding 
significant  branches  of  cross-border  banking  groups  of  9 
December  2016;  Memorandum  of  Understanding  on 
regarding  Banks  with  Cross-Border 
Cooperation 
Establishments  between  the  Central  Banks  of  Denmark, 
Estonia,  Finland,  Iceland,  Latvia,  Lithuania,  Norway  and 
Sweden of 15 December 2016. 

20 

3040506070800809101112131415FinlandEuro Area 
 
                                                           
                                                           
4.2. Financial sector 

as  the  capital  city  region,  where  the  demand  for 
small apartments has been increasing. In the course 
of  2016,  nominal  house  prices  have  started  to 
increase  in  the  capital  city  region  while  they 
remained flat in rest of the country. The European 
Systemic Risk Board (ESRB) issued a warning to 
Finland (as well as to seven other Member States) 
the  medium-term 
in  November  2016  on 
vulnerabilities  of  the  residential  real  estate  sector 
as  a  source  of  systemic  risk  to  financial  stability. 
The ESRB highlighted the fact that household debt 
is  not  evenly  distributed  across  households  and 
that  a  possible  materialisation  of  risks  could  have 
large  spill-over  effects  to  neighbouring  countries 
through the Baltic-Nordic banking sector. 

Graph 4.2.3:  Relative house prices, Finland 

(1) Data until June 2016 
Source: Bank of Finland, European Commission 

4.2.4.  PRIVATE INDEBTEDNESS* 

liabilities 

(e.g.  bonds, 

Non-financial  corporate  debt  increased  rapidly 
in  2015,  but  since  then  the rate of  increase  has 
levelled  off.  Foreign  counterparts  account  for 
roughly  one-third  of  Finnish  non-financial 
corporations’ 
loans, 
shareholder  equity),  the  remaining  liabilities  are 
accounted  for  by  domestic  counterparts.  Non-
financial corporations’ foreign liabilities increased 
altogether  by  about  14 %  in  2015  while  domestic 
liabilities  remained  broadly  unchanged.  The  main 
drivers  for  foreign  liabilities  were  intra-group 
loans  and 
foreign  direct 
investments. Since this recent increase in liabilities 

increase 

the 

in 

force  preventing  a  more  efficient 
allocation (OECD, 2016e).  

resource 

The EU funds foster financing to Finnish SMEs. 
In September 2016, an agreement was reached on 
the  implementation  of  the  SME  initiative.  By 
combining national budget funding with 40 million 
euros  of  its  European  Structural  and  Investment 
Funds and Horizon 2020 funding, to be leveraged 
with  commercial  banks  through  a  risk-sharing 
mechanism,  Finland  expects 
to 
release  400  million  euros  of  new  SME  financing 
(TEM,  2016).  The  European  Fund  for  Strategic 
Investment  has  also  contributed 
the 
investment  projects.  The  Investment  Plan  for 
Europe  has  already  benefited  around  300  Finnish 
SMEs via a financing agreement amounting to 75 
million euros (European Commission et al, 2016). 

initiative 

towards 

the 

Graph 4.2.2:  Growth of banks’ loans to non-financial 
corporations, %, y-o-y, 2004q1-2016q3 

Source: Bank of Finland, European Commission 

4.2.3.  HOUSING MARKET 

The  fall  in  house  prices  bottomed  out  in  2016.  
House  prices  fell  during  2014  and  2015  in  both 
nominal  and  real  terms  and  are  not  currently 
thought  to  be  over  or  under  valued.  The  house 
prices-to-salary  index  or  house  prices-to-rents 
ratios  are  close  to  their  long  run  averages  (see 
Graph 4.2.3). Recently rents have been increasing 
rapidly  especially  in  attractive  urban  regions  such 

21 

-50-40-30-20-1001020304050602004200620082010201220142016Up to 1 yearOver 1 and up to 5 yearsOver 5 years7090110130150170190210818487909396990205081114House prices-to-CPI ratioHouse prices-to-rents ratioHouse prices-to-rents ratio, LR averageHouse prices-to-salary index ratioHouse prices-to-salary index ratio, LR average 
 
 
 
corporations’ 

was  mainly  driven  by  debt  instruments,  non-
financial 
ratio 
increased  in  2015.  The  situation  reversed  in  the 
first  half  of  2016,  when  credit  flows  turned 
negative while nominal GDP growth accelerated.  

debt-to-GDP 

Finnish  firms  have  held  a  significant  positive 
net  lending  position  since  1993.  Their  gross 
operating  surplus  would  have  been  more  than 
sufficient  to  finance  all  the  gross  fixed  capital 
formation.  However,  in  parallel  to  the  surplus, 
non-financial  corporations  have  increased  their 
borrowing.  It  appears  that  the  corporations  have 
used their leverage to acquire financial assets both 
in  Finland  and  abroad.  Most  of  the  assets  they 
acquired were loans, trade credits and shares. 

Graph 4.2.4:  Non-financial corporations liabilities, %, y-o-y 

Source: Statistics Finland, European Commission 

Finnish 

aggregate, 

non-financial 
On 
corporations  appear  to  engage  in  borrowing  in 
order  to  issue  loans  and  to  acquire  unquoted 
shares.  In  2015,  the  property  income  of  the  non-
financial  corporate  sector  was  equal  to  32.5 %  of 
their gross operating surplus. This suggests that the 
Finnish companies earn a significant share of their 
income  from  financial  investments.  To  a  large 
extent,  the  borrowing  is  carried  out  by  large 
companies.  Based  on  the  Orbis  database  (Bureau 
Van  Dijk),  those  companies  with  the  largest  debt 
are energy and forestry sector firms that also have 
large assets both in Finland and in other countries.  

4.2. Financial sector 

Graph 4.2.5:  Drivers for non-financial corporations debt-to-

GDP ratio 

Source: European Commission  

Households’  net  financial  assets  increased  in 
2015.  Households’  debt-to-GDP  ratio  increased 
from  65.5 %  in  2014  to  66.8 %  in  2015.  The 
interest  rates  were  favourable  and  the  banks 
offered  their  customers  the  possibility  to  stop 
housing loan amortizations for one year. This offer 
was  widely  used.  On  the  asset  side,  households’ 
financial  assets  rose  in  2015  to  143.6%  of  GDP. 
Finnish  households  own  a  rather  diverse  mix  of 
different financial assets. The rate of ownership of 
mutual  fund  shares  and  publicly  traded  stocks  is 
the  highest  in  Europe,  perhaps  indicating  high 
financial  literacy.  Households  between  income 
deciles III and IX have negative net financial asset 
position  as  these  households typically  also  have  a 
mortgage. Taking into account real assets, such as 
income 
apartments,  households  in  almost  all 
groups, including the top and bottom deciles, have 
positive net assets. (ECB, 2016) 

Household saving decisions could be affected by 
characteristics  of  the  pension  system.  The 
earnings  related  pension  system  is  partially  pre-
funded  and  covers  the  majority  of  the  pensioners. 
The  contributions  to  the  pension  system  are 
compulsory  and  paid  regularly  by  the  employer. 
Over  the  years,  the  system  has  accumulated 
pension funds that currently amount to nearly 90 % 
of  GDP.  The  existence  of  these  pension  funds  is 
likely  to  influence  households’  saving  decisions, 
limiting the need to accumulate financial assets on 
international 
In  a 
private  accounts. 

recent 

22 

-8-4048201120122013201420152016Total foreign liabilitiesTotal domestic liabilitiesTotal liabilities% y-o-y-15-10-50510152006Q107Q108Q109Q110Q111Q112Q113Q114Q115Q116Q1y-o-y changeCredit flowReal growthInflationOther changesD/GDP, change 
 
 
4.2. Financial sector 

comparison,  the  Finnish  pension  system  was 
ranked  on 
in  reliability  and 
transparency  (Melbourne  Mercer  Global  Pension 
Index, 2016).  

top  especially 

Graph 4.2.6:  Drivers for households’ debt-to-GDP ratio 

Graph 4.2.7:  Loan restructuring, debtors in enforcement 

Source: European Commission 

sector 

remains 

While  the  amount  of  non-performing  loans  in 
low,  other 
the  banking 
that  require 
indicators  show  some  signs 
monitoring.  The  number  of  private 
loan 
restructuring  applications  was  on  an  increasing 
path  since  2008  until  2016  when  the  number  of 
applications  decreased  slightly.  The  number  of 
distraint  cases  peaked  in  2013  and  has  been 
declining since then. However, at the end of 2016, 
the number of people who had been flagged in the 
database 
company 
Asiakastieto,  as  having  problems  to  fulfil  their 
financial  obligations,  was  about  1 %  higher  than 
one  year  earlier,  reaching  8.7 %  of  the  adult 
population.  The  population  group  with  most 
problems  are  males  aged  25  to  44.  Amongst  this 
group,  about  15 %  were  black-listed 
the 
database. 

information 

credit 

of 

in 

Source: Statistics Finland, European Commission 

Measures to limit the risks related to household 
debt  have  been  introduced.  In  June  2016,  a 
maximum  loan-to-value  ratio  for  housing  loans 
was  introduced,  at  90 %  (95 %  for  first  time 
buyers). A 10 % minimum average risk weight for 
housing  loans  will  be  introduced  in  July  2017  for 
banks that have adopted the Internal Ratings Based 
Approach (IRBA). The minimum level of the risk 
weight  was  increased  because  the  risk  weights 
based  on  the  IRBA  are  low  in  Finland  by 
international  comparison  and  vary  significantly 
between  credit 
is 
expected to strengthen banks’ capital adequacy and 
to reduce the demand for housing loans through an 
increase  in  interest  spreads.  The  tax  deductibility 
of  interest  payments  on  housing  loans  has  been 
gradually  reduced.  In  2014,  75 %  of  interest 
payments were deductible. In 2017, the deductible 
share  will  decrease  to  45 %  and  in  2018  stand  at 
35 %.  These  measures  are  expected  to  constrain 
the growth of households’ debt. 

institutions.  The  decision 

23 

-6-4-2024681006Q107Q108Q109Q110Q111Q112Q113Q114Q115Q116Q1y-o-y changeCredit flowReal growthInflationOther changesD/GDP, change4004204404604805000100020003000400050000506070809101112131415Private loan restructuringsBusiness loan restructuringsCorporate bankruptciesDebtors in enforcement - natural persons, 1000 (rhs) 
 
 
4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

4.3.1.  LABOUR MARKET POLICIES 

like 

turned 
to 

the  economy  has 

to  growth, 
As 
increase  and 
employment  has  started 
unemployment  has  started  to  decrease.  Long-
term  unemployment,  however,  increased  by  13 % 
and  very  long-term  unemployment  by  18 %  year-
on-year  in  2016.  (Ministry  of  Economic  Affairs 
and Employment, 2016a). The activity rate among 
the  25-39  age  group  has  declined  since  2005,  in 
contrast to the EU average, where it has increased. 
The rate is now below the EU average. Those who 
to  work  but  are  not  seeking 
would 
employment  have  increased,  from  93 000  in  2008 
to  152 000  in  2015  (63  %  increase  v  12 %  at  EU 
level).  Disincentives  to  accept  work  and  sluggish 
mobility  between  sectors  and  regions  remain  a 
challenge  and  can  be  a  source  of  mismatches 
between labour supply and demand. Promoting job 
creation and the integration of those furthest away 
from the labour market (for example young not in 
employment,  education  or 
training,  non-EU 
nationals)  are  major  challenges  for  the  Finnish 
labour market. 

labour  market 

Restructuring  of 
is 
the 
underway.  Manufacturing,  which  had  one  of  the 
highest  shares  in  employment  in  the  EU,  showed 
more  than  a  21 %  decline  in  jobs  between  2008 
and  2015,  due  to  a  weak  export  performance. 
Other  sectors  have  showed  stable  or  growing 
headcounts:  employment  in  services  grew  by 
reflecting  a 
the  same  period, 
1.5 %  over 
restructuring towards services in the economy and 
in  employment.  The  latest  forecast  from  the 
Ministry  of  Economic  Affairs  and  Employment 
(Ministry  of  Economic  Affairs  and  Employment 
2016c)  shows  that  the  labour  demand  would 
increase  by  30 000  employees  in  total  over  2016 
and  2017,  with  construction  and 
services 
contributing  with  respectively  15 000  and  20 000 
additional employees. 

There  has  been  a  decline  in  macroeconomic 
skill  mismatches.(11)  That  was  partly  due  to  a 
decrease in the share of low-skilled workers, even 
though  their  employment  situation  is  worsening. 
Employment  rates  for  different  education  levels 

have declined over recent years but more markedly 
so for low-skilled (12). This decline could be due to 
the retirement of less educated workers and cohort 
effect in the context of relatively stronger demand 
for  high  skills.  At  the  same  time,  long  distances 
and  shortages  of  affordable  housing  in  areas  of 
high  labour  demand  do  not  facilitate  commuting 
and  mobility  and  can  be  a  source  of  mismatch 
between  labour  supply  and  demand.  That  is  the 
case 
regional  dispersion  of 
unemployment  and  employment  rates  does  not 
look high in a cross country perspective. (13) 

even 

the 

if 

Graph 4.3.1:  Key labour market indicators 

Activity rate and Employment rate as % of total population 
(20-64) 
Unemployment rate and long-term unemployment rate as % 
of labour force (15-74) 
Youth unemployment rate as % of labour force (15-24) 
NEET: Not in employment, education or training as % of 
population (15-24)   
Source: European Commission  

the  unemployment 

Open  vacancies  stand  at  relatively  high  levels.  
The ratio of open vacancies to employment stands 
currently  at  a  high  level.  The  open  vacancies-to-
employment ratio was in 2016 almost as high as in 
two 
2007  but 
percentage  points  higher. 
flag 
mismatches between labour demand and supply or 
low  attractiveness  of  certain  offer  or 
little 
incentives to take up certain jobs. Labour shortages 
are  more  visible  in  certain  sectors:  real  estate, 
professional  activities,  administration  and  support 

rate  was 
  This  may 

(11)  The  main indicators of  macroeconomic skills  mismatch in 
this  analysis  are  dispersion  measures  of  employment  rates 
across  skill  groups.  This  is  to  proxy  the  gap  between  the 
skills  that  the  working  age  population  has  and  the  skills 
needed (or used) in the economy. 

(12)  Skills  are  proxied  by  the  maximum  educational  level 
attained.  For  more  details,  see  Kiss  and  Vandeplas  (2015) 
for more details on the methodology. 

(13)  Both NUTS 2 and 3. 

24 

777879808105101520250103050709111315Unemployment rate (lhs)Long-term unemployment rate (lhs)Youth unemployment rate (lhs)NEET rate (lhs)Activity rate  (rhs) 
 
                                                           
 
                                                           
4.3. Labour market, education and social policies 

Social  partners  have  agreed  to  increase  the 
possibilities for firm-level collective bargaining.  
Possibilities  for  local  bargaining (16)  are  included 
in  86 %  of  the  current  collective  agreements  of 
organised  employers  (EK,  2016).  About  70 %  of 
sectoral  collective  agreements  contain  a  ‘crisis 
clause’ (determining when it is possible to deviate 
from their conditions on issues such as wages and 
working time) and 30 % of them have a work time 
bank (17) (18). It remains to be seen to what extent 
in  practice. 
the  crisis  clauses  will  be  used 
Successful 
the 
willingness  and  capacity  to  negotiate  (Kröger, 
Mähönen,  Klemetti,  Nieminen,  Finnish  Labour 
Review  2016).  The  possibilities 
local 
bargaining  included  in  the  Competitiveness  Pact 
are available for organized employers as parties of 
the  collective  agreements.  The  unorganized 
employers have to follow those sectoral collective 
agreements which have been declared as generally 
binding.(19) 

local  bargaining  will  require 

for 

Employment  outcomes  are  hampered  by 
disincentives  to  work,  as  reflected  by  above-
average  unemployment  and  inactivity  traps 

(16)  These  collective  agreements  allow  for  local  agreement  on 
some  issues,  such  as  how  the  increase  of  working  time  in 
the competitiveness pact will be implemented. 

(17)  A flexible working time arrangement, where overtime can 

be compensated by leave. 

(18)  All calculations are based on the membership organisations 
of the Finnish Confederation of Industries (EK) and do not 
include employers who are not members of EK. 

(19)  The employers’ organisation density is around 65 % (based 

on 2013 figures from Eurofound). 

service  activities. (14)  The  employment  share  in 
these sectors has increased over time and the share 
in  unemployment  has  declined  substantially  since 
2008. 

It  will  allow 
to  be  reflected 

In  the  follow  up  to  the  Competitiveness  Pact 
(see Box 1.1), social partners agreed to prepare 
a  new  "Finnish  model"  for  wage-setting  to 
enable  competitiveness.  The  new  wage-setting 
model  is  a  move  away  from  centralised  wage-
setting. (15) 
for  productivity 
differences 
in  wages  across 
different sectors. At the same time the wage norm 
set by the tradable sector will impose a ceiling for 
the  other  sectors.  The  first  round  of  wage 
negotiations under the new Finnish model will take 
place  in  2017  for  2018  wages,  but  the  order  of 
sectorial  negotiations 
the  degree  of 
coordination  across  sectors  remain  unclear.  It  is 
envisaged that the Bank of Finland would provide 
an outline of the economic situation in Finland as a 
starting  point  for  the  negotiations.  Overall,  the 
decentralization  of  wage-setting  may  have  a 
positive  effect  on  employment 
it  shifts 
adjustment to shocks from the quantity of labour to 
the price of labour, and if a sufficient coordination 
is ensured. 

and 

if 

(14)  These sectors are considered jointly in the analysis. 
(15)  The Finnish Confederation of Industries announced in 2016 
that  it  will  no  longer  participate  in  central  wage-setting 
negotiations. 

25 

 Box 4.3.1: Towards the Finnish wage-setting model – what are the challenges?The challenge for the new more decentralized wage-setting system is to ensure the overall wage level is kept in line with productivity developments, while allowing for differences in productivity across sectors. The aim is to contribute towards improved competitiveness, economic growth and increased employment. Theory suggests that uncoordinated sector-level bargaining can deliver undesired macroeconomic results both in terms of employment and wage moderation (Calmfors and Driffil 1988, Calmfors 2001). This was witnessed in Finland also in 2007-2008 when significant wage hikes were experienced as a result of sector-level bargaining. However, more recent experiences show that global competition has a moderating impact on wage costs also under this model (Obstbaum & Vanhala 2016, Calmfors 2001, Danthine and Hunt 1994). Still, as a general rule, decentralisation of collective bargaining and wage-setting should also be accompanied by reinforced coordination across the sectors in order to avoid wage hikes (Calmfors 2001, Obstbaum & Vanhala 2016). Such coordination can also have a positive impact on employment (Obstbaum & Vanhala 2016). The wage-setting model currently being planned in Finland is inspired by the Swedish model, where wage agreements have been negotiated at sector level since the 1990s. Following wage hikes in the 1990s, the wage coordination across sectors in Sweden is now conducted by the confederations of employees organisations to ensure that all the sectors apply the wage norm set by the tradable sector (Bergholm & Bieler 2013).  
                                                           
                                                           
 
 
 
 
 
4.3. Labour market, education and social policies 

allowing  the  use  of  basic  (non-earnings  related) 
unemployment  benefit  as  mobility  and  wage 
subsidies  to  activate  jobseekers.  Unemployment 
benefits  can  also  be  received  while  working  as  a 
part-time entrepreneur or as start-up grants. 

The introduction of in-work benefits is likely to 
in-work 
incentives  to  work.  Some 
increase 
benefits  were  introduced  in  2014  and  2015. (22) 
The  initial  results  of  these  benefits  show  an 
increase  of  unemployed (23)  people  receiving 
another  income  from  6.7 %  in  2013  to  10.6 %  in 
2015  (Kela,  2015).  However,  there  is  also  some 
indication that the person moves to a different type 
of  trap,  i.e.  from  unemployment  to  a  low-wage 
trap (24)  (Kotamäki  &  Kärkkäinen,  2014),  in  a 
context where the low-wage trap is already higher 
than  the  EU  average  (55.8  %  against  47.3 %). In-
work  benefits  can  result  in  subsidising  employers 
paying  low  wages  work  instead  of  providing 
incentives to work. 

them  with 

Increased  incentives  to  work  bring  the  best 
benefits  when  coupled  with  effective  active 
labour market policies. There are plans to use the 
unemployment  benefits  to  fund  active  measures 
and to concentrate on the most effective measures. 
Given  the  ongoing  economic  restructuring,  it  is 
important  to  ensure  that  workers  are  retrained  to 
provide 
the  skills  demanded  by 
employers and to improve labour market matching 
(Andersen  &  Svarer,  2011). (25)  The  provision  of 
in  close 
labour  market 
collaboration  with  local  employers,  and  found  to 
be relatively successful, is expected to continue. In 
addition, expanding the possibility to participate in 
studies while receiving the unemployment benefit, 
is  under  discussion  (26).The  social  partners  could 
play an increased role in the process of job-to-job 
transitions  with  a  stronger  focus  on  job  search 
support in compensation packages (OECD, 2016).  

training,  designed 

(22)  300 EUR protected part of the unemployment benefit. For 
further  information,  refer  to  the  2015  Country  Report  on 
Finland.  A  ministerial  assessment  of  the  impact  of  these 
measures on employment will take place in 2017. 

(23)  These  persons  are  still  recorded  as  unemployed  given  the 

short duration of their assignments. 

(24)  For  low  wage  earners  seeking  higher  incomes  a  higher 

proportion of their earnings would be ‘taxed away’. 

(25)  Torben  M.  Andersen  and  Michael  Svarer,  Business  cycle 
contingent  unemployment  insurance,  in  Nordic  Economic 
Policy Review, 1/2011 

(26)  A  tri-partite  group  is  looking  into  this  issue,  the  deadline 

for their conclusions is in the spring 2017. 

resulting from the interplay of tax and benefits 
systems.  In  2015,  the  unemployment  trap  was 
76.1 %, against an EU average of 69.3 % (20). The 
inactivity  trap  is  also  much  higher  than  the  EU 
average  (68 %  v  56.1 %) (21)  suggesting  that  in 
some  cases  moving  into  a  paid  job  is  not 
sufficiently  attractive.  Traps  are  particularly  high 
for  single  parents  (75.0 %  v  the  EU  average  of 
54.5 % for those with two children). Means-tested 
social  assistance  and  housing  benefits  may  create 
most of the disincentives to work (EC-OECD Tax 
and  Benefits  database;  Viitamäki,  2015).  The 
traps) 
administrative  complexity 
related  to  the  reinstating  of  benefits  for  those 
moving  in  and  out  of  the  labour  market,  is  also 
causing barriers to work. The decision process and 
the  waiting  period  to  get  benefits  reinstated  can 
take  weeks.  The  situation  is  expected  to  improve 
when the updated income register comes into force 
in  2020.  Meanwhile,  some  unemployment  funds 
(private  or  administered  by  the  trade  unions)  are 
making attempts to digitalise their systems to make 
the application and decision process faster. 

(bureaucratic 

labour  market 
the  eligibility 

Strengthening  incentives  to  work  is  the  key  to 
participation. 
increase 
Narrowing 
to  some  benefits, 
strengthening conditionality or increased sanctions 
in  case  of  non-compliance  with  activation 
requirements  are  some  of  the  measures  proposed 
by  the government.  For  instance,  the participation 
in  active  labour  market  policy  measures  will  be  a 
condition for receiving unemployment benefits. As 
of  2017,  jobseekers  will  in  some  cases  have  to 
their  professional 
accept  work  not  matching 
background,  work  with 
than 
income  through  unemployment  benefits,  work 
located within a three hours total daily commuting 
time  or  short-term  work  assignments  in  order  to 
keep  their  benefits.  The  duration  of  the  earnings-
related  unemployment  benefit  was  reduced  from 
500 to 400 days (from 400 to 300 days in the case 
of a career shorter than 3 years) at the beginning of 
2017.  Positive  incentives  were  introduced  too: 

lower  earnings 

(20)  Measures  what  percentage  of  the  gross  earnings  (after 
moving into employment) is ‘taxed away’ by the combined 
effects  of  the  withdrawal  of  benefits  and  higher  tax  and 
social  security  contributions.  The  figure  is  for  single 
persons without children earning 67 % of the average wage 
when in work. 

(21)  Measures  the  financial  incentives  to  move  from  inactivity 
and  social  assistance  to  employment.  It  is  defined  as  the 
rate  at  which  the  additional  gross  income  of  such  a 
transition is taxed. 

26 

 
                                                           
                                                           
4.3. Labour market, education and social policies 

funding 

reserved  extra 

From  2017  all  unemployed  will  have  regular 
meetings with public employment services. This 
new measure aims at a faster re-employment. The 
to 
government  has 
implement the measure. This will be done partly in 
co-operation with private sector service providers. 
There  are  plans  to  outsource  part  of  employment 
services when the responsibility for these services 
is  transferred  from  the  municipality  to  the  newly 
created  regional  authorities.  It  remains  to  be  seen 
whether  private  partners  will  be  provided  with 
to 
appropriate 
avoid 
additional 
"creaming" 
disadvantage  for 
the 
strongest  barriers 
Job  Mobility 
Laboratory,  2011)),  and  also  to  ensure  permanent 
returns  to  the  labour  market.  The  long-term 
unemployed  in  need  of  additional  support  have 
been  receiving 
increased  support  since  2016 
through  one-stop-shops  providing  a  range  of 
services, 
support, 
services 
rehabilitation).  While  the  coverage  of  long-term 
unemployed  is  well  ensured,  reaching  out  also  to 
those  who  are  inactive  and  not  looking  for  work 
could provide better labour market outcomes. 

the  unemployed  facing 

incentives, 
effects 

in  order 
in 

(European 

(resulting 

(social 

health 

are 

some  35 000 

Some  recent  measures  allow  early  retirement 
for  the  long-term  unemployed,  which  goes 
against the objective of extending working lives. 
The government is preparing a specific legislation 
that  allows  the  retirement  of  those  long-term 
unemployed who on 1 January 2016 were over 60 
and who have been unemployed for more than five 
years.  There 
long-term 
unemployed  who  are  over  60  and  5 300  of  them 
will  fulfil  the  criteria  under  the  new  law.  The 
additional  costs  of  this  measure  are  calculated  to 
be  approximately  16  million  euros  over  the  next 
decade.  As  this  is  the  second  time  that  such 
legislation  is  introduced  (the  last  time  was  in 
2005),  expectations  may  build  up  that  similar 
possibilities  will  be  available  again  in  the  future. 
This may discourage those eligible (or expecting to 
become eligible) to seek employment. 

Youth unemployment and the number of young 
people  not 
in  employment,  education  or 
training  declined  in  2016.  The  unemployment 
rate for those aged 15-24 declined by about 2 pps. 
to  20.1 %  in  2016.  The  share  of  people  not  in 
employment,  education  or 
increased 
steadily  since  2011,  reaching  10.6 %  of  the 
population aged 15-24 in 2015. In 2005-2015 (see 

training 

for 

the 

economy (27).  The 

Graph  1.3),  the  employment  rate  for  the  younger 
cohorts,  especially  men,  declined  more  than  the 
average 
lower 
employment  rates  for  the  young  highlight  the 
continued  need  for  policies  catered  for  the  youth. 
Budget  cuts  in  the  youth  guarantee  services  may 
affect 
in 
employment, education or training. 

in  particular  young  people  not 

Employment of non-EU nationals is lower than 
native  Finns,  with  the  second  generation  also 
affected. In 2015, this employment rate gap (25.4 
pp)  was  one  of  the  highest  in  the  EU  and  was 
significantly  above  the  EU  average  (13.9  pp). 
Women  from  non-EU-countries  had  the  lowest 
employment  rate  in  the  EU  (35.7 %,  37.1  pps 
below  native  Finnish  women).  Inactivity  is  the 
main  factor  for  the  low  employment  of  non-EU 
women  whereas  unemployment  is the  main  factor 
regarding men. Overall, Finland's attractiveness for 
high-skilled  immigrants  has  been  limited,  which 
has led to low levels of work-related immigration. 
Given  the  magnitude  of  recent  inflow  of  asylum 
seekers  (38.000,  0.7%  of  total  population)  and 
considering  the  low  employment  rate  of  refugees 
who  had  arrived  before  2015,  the  labour  market 
integration  of  refugees  is  a  major  challenge.  If 
addressed well, the current inflow of refugees and 
migrants  provides  opportunities  to  counter  the 
effects  of  an  ageing  population.  Roughly  one 
asylum  seeker  in  four  is  estimated  to  ultimately 
receive  a  positive  decision  on 
their  asylum 
application  in  Finland.  Language  barriers  as  well 
as lower levels of education and skills (see Section 
on education) constitute obstacles to labour market 
integration. 

In  response  to  an  increase  of  asylum  seekers, 
the  government  introduced  a  new  integration 
pilot  programme  for  migrants  for  the  period 
2016-2019.  A  new  private  sector 
initiative, 
supported by the Ministry of Economic Affairs and 
Employment  and  the  Finnish  Innovation  Fund, 
Sitra, aims at training and employing at least 2 000 
migrants  in  2017-2019.  The  project  using  the 
social impact bond model offers migrants training 
that will make them more attractive to employers. 
Investors  will  fund  the  activities  and  carry  the 
financial risks whereas the public sector will make 
the  payments  only  if  the  employment  objectives 
are met. In addition, there have also been efforts to 

(27)  With the exception of young mothers 

27 

 
                                                           
4.3. Labour market, education and social policies 

fathers to take leave to look after their children. In 
Finland only 8.8 % of men use paid parental leave 
during  their  lifetime,  in  comparison  to  25.5 %  in 
Sweden (Employment and Social Developments in 
Europe, 2015). (32) 

Improving  female  participation  in  the  labour 
market  hinges  on  measures  to  support  young 
mothers'  transition  to  work.  Especially  mothers 
with  low  education  and  weak  labour  market 
attachment,  who  are  not  provided  with  the  right 
incentives,  would  deserve  attention  (Närvi,  2014, 
Bouget  et  al  2015).  The  parliament  has  amended 
the law that regulates fees for childcare resulting in 
lower costs especially for low income parents. The 
new childcare fees will come into effect in March 
2017. 

the 

lower 

There  are  poverty  and  social  exclusion  risks 
associated  with 
labour  market 
attachment of some population groups, such as 
the  non-EU  born.  The  employment  rate  of  the 
non-EU born is low. The non-EU born who work 
register lower earnings (although the difference in 
earnings is smaller than the employment rate gap) 
and  their  in-work  poverty  rate  is  three  times 
higher.  This  results  in  a  poverty  gap (33)  of  23.3 
pps,  which  is  higher  than  the  EU  average  of  17.4 
pps.  Also,  recent  reductions  in  the  wage  subsidy 
scheme  have  had  a  considerable  impact  on  the 
employment  prospects  of  those  working  for  third 
sector  organisations,  who  tend  to  be  among  the 
most  vulnerable.  The  use  of  these  subsidies  has 
fallen  from  14 000  in  2007  to  4 000  persons 
(SOSTE, 2016) and further cuts are planned.  

4.3.3.  EDUCATION AND SKILLS 

in 

Finland's  education  outcomes  remain  among 
the  best  in  the  EU  but  continue  to  weaken, 
science  and  mathematics. 
particularly 
According  to  the  2015  OECD  programme  for 
international 
the 
proportion  of  low  achievers  in  Finland  is  among 
the  smallest  of  the  tests.  However,  compared  to 
2006, the proportion of poor performers in science 
has  nearly  tripled  while  the  proportion  of  top 

assessment 

student 

tests, 

(32)  Parental  leave  in  Finland  refers  to  leave  provided  to  look 
after  children  from  the  age  of  3  months  to  9  months. 
Swedish parents are entitled to 480 days of parental leave, 
of which 90 days are reserved for the father, 

(33)  Vis-à-vis the rest of the population. 

direct  European  Structural  Investment  Funds 
towards  activities  that  enable  the  integration  of 
migrants. 

4.3.2.  SOCIAL POLICIES 

A  basic  income  scheme  pilot  has  been  running 
since  the  beginning  of  2017.  The  pilot  scheme 
aims  at  modifying  the  social  security  system  to 
better adjust to the changes in working life, as well 
as  tackling  the  complexity  of  the  current  benefits 
system  and  creating  incentives  to  accept  work. 
2 000 participants aged 25-58 who were receiving 
the basic unemployment benefit at the end of 2016 
are included in the pilot scheme. (28) They receive 
approximately  560  euros  per  month  as  basic 
income (29) without any means-testing and are able 
to  accept  work  without  losing  the  benefit.  The 
experiment  is  expected  to  provide  information 
about  individuals'  responses  to  changes  in  benefit 
systems.  Such  information  could  help  design 
possible  future  reforms  of  the  social  security 
system. 

The impact of motherhood on women’s careers 
is high in Finland. The employment gap between 
women  with  a  child  younger  than  six  years  and 
women  without  children  (20-49)  was  15.7  pps  in 
2015 (30). In 2015, approximately 84 % of mothers 
(and  6.9 %  of  fathers)  drew  on  the  homecare 
allowance.  The  homecare  allowance  is  likely  to 
reduce  labour  market  participation,  with  longer 
leave periods for those with a weak labour market 
attachment  (Närvi,  2014,  Bouget  et  al,  2015). 
Labour  market  prospects  are  likely  to  have  been 
hampered  by 
the 
long  periods  of 
homecare  allowance  (Thévenon  and  Solaz,  2013), 
and the allowance is one of the potential causes of 
the  higher  than  EU  average  gender  pay  gap (31). 
These  assessments  of  home  care  allowance  are 
limited  only  to  the  possible  impact  on  labour 
market  participation  of  mothers,  without  taking 
into  account  wider  social  policy  objectives. 
Overall,  more  incentives  could  be  provided  to 

leave  on 

(28)  This  benefit  is  available  for  unemployed  jobseekers  who 
have been in employment before but are not eligible for the 
earnings-linked unemployment benefit. 

(29)  This  amount  is  equal  to  the  basic  unemployment  benefit 

minus tax. 

(30)  Almost two times the EU average (8.6 % in 2015) 
(31)  For 

further  details,  please 

refer 

to 

the  European 

Commission 2016 report 

28 

 
                                                           
                                                           
4.3. Labour market, education and social policies 

number  of  vocational  qualifications  available  in 
Finland,  broadening  the  qualification  content  and 
allowing  for  more  individual  study  paths.  This  is 
expected  to  help  reduce  skills  mismatches  (see 
Section  on  labour  market).  Initial  analysis  of  the 
impact  of  earlier  cuts  in  government  spending 
shows  that  vocational  education  and  training 
providers  have  neither  reduced  study  places  nor 
the number of teachers and trainers, but have saved 
on  other  aspects 
such  as  equipment  and 
investments.  Therefore  quality,  free  access  for  all 
and  territorial  coverage  have  so  far  not  suffered. 
These issues will warrant close monitoring during 
the following stages of the reform.  

Graph 4.3.2:  PISA: Share of top performers in science- 

Finland 

Source: OECD, European Commission 

into 

Action has been taken to integrate the recently 
arrived  asylum  seekers 
the  Finnish 
education  system.  The  reception  of  asylum 
seekers is organised at the level of municipalities, 
which  receive  additional  public  funding  per 
person,  for  a  maximum  of  one  year.  This  funding 
can  be  used  to  set  up  preparatory  classes  or  to 
organise additional support in mainstream classes, 
or to provide a specific curriculum. At the national 
level,  an  action  programme  on  the  educational 
tracks and integration of immigrants was launched 
in  2016.  The Ministry of  Education  has  estimated 
the needs and costs of immigrants in education to 
amount to around 160 million euro annually. 

performers  has  dropped  by  about  a  third  (see 
Graph  4.3.2.).  Performance  differences  between 
regions have grown and the Helsinki area is doing 
areas.  The 
than 
significantly  better 
achievement gap between pupils with and without 
a migrant background is the widest in the EU (83 
points)  and  remains  among  the  largest  also  when 
adjusted  for  the  socioeconomic  status  (65  points). 
This translates into a learning gap of two years and 
more. 

rural 

general 

expenditure 

Education  expenditure  has  declined  in  recent 
years albeit from a comparatively high level. In 
2015 
on 
government 
education was among the highest in the EU both as 
a proportion of GDP (6.2 %) and as a proportion of 
total  general  government  expenditure  (11.0 %). 
However,  education  expenditure  has  been  cut  in 
real  terms  since  2011  and  the  government's 
programme  envisages  further  savings.  In  2019 
expenditure  to  GDP  ratio  is  projected  at  around 
0.4 pps. of GDP lower than in 2015 (0.7 pps. lower 
than  in  2011).  Reforms  are  being  carried  out  to 
make  the  education  system  more  efficient  and 
effective.  Skills  erosion  as  a  result  of  a  weaker 
education  system  will  become  visible  only  over  a 
longer  period  of  time;  similarly,  any  corrective 
policy  action  will  take  time  to  have  an  impact. 
Against  the  deterioration  in  the  results  of  the 
programme  for  international  student  assessment 
results,  and  given  the  importance  of  a  skilled 
labour  force  and  strong  science  base  for  future 
economic  growth,  it  is vital  that cuts  in  education 
expenditure do not lead to skills erosion.  

The  universities  aim  at  increasing  the  transfer 
of  research  output  to  the  business  sector. 
Current  government  reforms  seek  to  encourage 
higher  education  institutions  to  develop  a  sharper 
strategic focus and clearer profiles in their fields of 
study.  The  government  objectives  are  to  shorten 
the  time  it  takes  to  enter  higher  education  and  to 
move 
the 
institutions  are  autonomous  only  limited  public 
influence  can  be  exerted  via  university  financing 
informal  steering. 
agreements, 
These  actions  fit  the  trend  in  other  European 
countries. For further discussion, see section 4.5.1. 

to  work.  Since 

from  graduation 

legislation  and 

The vocational education and training reform is 
expected  to  be  finalised  in  2018.    It  aims  at 
making  vocational  education  and  training  more 
responsive to labour market needs by reducing the 

29 

05101520252006200920122015Share of low performersShare of top performers 
 
4.4. INVESTMENT 

4.4.1.  EXTERNAL COMPETITIVENESS* 

Exports of services have increased over the past 
10 years, while exports of goods, which account 
for  70 %  of  foreign  trade,  are  still  more  than 
10 %  below  their  pre-crisis  level.  The  share  of 
Finnish  exports 
the  global  markets  has 
continued  to  decline  for  the  past  10  years  (see 
Graph 4.4.1). 

in 

Graph 4.4.1:  Breakdown of growth in export market shares 

as  they  were  less  exposed  to  the  depreciating 
exchange  rates  of  the  Russian  rouble  and  the 
Swedish  krona 
(both  countries  are  among 
Finland’s  main  export  destinations).  Moreover, 
while  Finland’s  relative  unit  labour  costs  in 
manufacturing  have  decreased,  the  decrease  has 
been smaller than in Sweden or in the euro area on 
aggregate.  

Graph 4.4.2:  Real effective exchange rates, selected 

countries, 2005=100 

Source: European Commission 

The  export  market  share  losses  since  2008 
coincide  with  a  rapid  decline  of  nominal  cost 
competitiveness. The European Commission 2016 
report  for  Finland  discussed  the  developments  in 
wages  and  productivity  over  that  period  in  detail. 
On  an  aggregate  level,  the  increase  in  aggregate 
nominal  unit  labour  costs  has  slowed  down  in 
2014-2016  owing  to  moderate  collective  wage 
agreements  (see  Graph  4.4.4).  This  indicates  that 
also  non-cost  competitiveness 
factors  have 
recently also had an impact on export performance. 

2013. 

Finland’s 

However, 

In  international  comparison,  part  of  Finland’s 
cost competitiveness losses have been corrected 
cost 
since 
competitiveness  in  terms  of  the  real  effective 
exchange rate against 37 industrial countries, using 
unit labour costs in manufacturing as deflator, was 
still  weaker  in  2015  than  10  years  earlier  (see 
Graph  4.4.2  ).  Other  euro  area  Member  States 
benefited  more  from  the  depreciation  of  the  euro, 

Deflator: manufacturing NULC, REER calculated against 37 
industrialised countries.  
Source: European Commission  

The  design  and  implementation  of  future  wage 
setting  practices  will  play  a  key  role 
in 
safeguarding competitiveness. As of 2017, a new 
collective  wage  agreement,  the  Competitiveness 
Pact, contributes to lowering wage costs in a step-
wise manner (see Box 1.1). Overall, the measures 
in  the  Pact  would  result  in  a  reduction  of  labour 
costs  by  approximately  4 %  which  will  improve 
Finland’s  cost  competitiveness.  As  shown  in 
the  European 
Graph  4.4.4  and  discussed 
Commission  2016 
labour  cost 
developments differ across sectors due to different 
productivity developments. In addition to the wage 
cost  measures,  the  social  partners  agreed  to 
develop  a  new  wage  setting  model  and  increase 
local collective bargaining as discussed in Section 
4.3.  Wage-setting  practices  across  industries  in 
coming  years  will  be  the  key  to  preserving  cost-
competitiveness.  

in 
report,  unit 

30 

-14-12-10-8-6-4-20246010203040506070809101112131415Rate of change y-o-y (%)Contribution to EMS: goodsContribution to EMS: servicesExport market share growth yoy90951001051101151201250506070809101112131415EA19EU28FinlandSweden2005=100 
 
 
 
4.4. Investment 

Graph 4.4.3:  Drivers for REER developments, Finland 

in 

the 
retain  competitiveness.  As  described 
European  Commission  2016 
report,  Finnish 
companies have not reaped the full benefits of the 
growth  in  their  export  markets.  However,  Finnish 
exports of goods have grown less than the markets. 
The goods  exports value has declined  since  2013. 
In  real  terms  the  goods  exports  have  slightly 
grown, and declined in 2015.   

growing 

In  recent  years,  Finland’s  main  export 
destinations  have  been 
slowly. 
Economic  growth  in  the  EU  has  remained  weak 
and  the  Russian  economy  fell  into  recession  in 
2014.  As  seen  in  Graph  4.4.5,  about  half  of  the 
estimated  losses  in  Finland’s  share  of  the  global 
export  market  in  2015  could  be  attributed  to 
sluggish growth in those markets to which Finnish 
companies  export.  Over  a  longer  time  period,  the 
main factor behind Finland’s declining share of the 
export  market  has  been  Finland’s 
global 
the  markets 
deteriorating  competitiveness 
outside the EU.  

in 

When REER appreciates, competitiveness decreases.  
Source: European Commission 

Graph 4.4.4:  Nominal unit labour costs by industry, 

2010=100 

Graph 4.4.5:  Breakdown of export market shares, Finland 

Source: European Commission 

remain 

challenges 

The continuous decline in goods exports and the 
loss  of  market  shares,  despite  the  gradual 
improvement  in  cost  competitiveness,  suggest 
that 
non-cost 
competitiveness 
and  productivity.  Labour 
productivity  has  stagnated  and  is  currently  at  the 
same  level  as  in  2011.  In  the  same  period,  the 
contribution  of  total  factor  productivity  to  growth 
has  remained  negative.  Low  productivity  growth 
has increased the pressure to reduce labour costs to 

in 

Initial specialisation (IS) represents gains or losses stemming 
from the exposure to a certain market while market share 
gains (MSG) measure the performance within a certain 
market. 
Source: European Commission 

The  current  account  surplus  vanished  after 
2010  notably  due  to  the  elimination  of  the 
surplus in the trade of capital goods. Moreover, 
the  surplus  in  trade  of  intermediate  goods  has 
declined while the deficit in trade in consumption 
goods 
private 
consumption has increased (see Graph 4.4.6).  

increased 

steadily 

has 

as 

31 

-10-50510150506070809101112131415NEER, %-ch.NULC, %-ch.REER, %-ch.6070809010011012013002030405060708091011121314152010=100Industry (except construction)ConstructionMarket servicesPublic servicesTotal (all activities)-16%-14%-12%-10%-8%-6%-4%-2%0%2%4%201020112012201320142015MSG - extra EUMSG - intra EUIS - extra EUIS - intra EU 
 
 
 
 
4.4. Investment 

and  record  a  large  surplus.  However,  in  recent 
years Finland has lost global market shares also in 
trade of services. 

The  structural  change  of  the  economy  has 
stabilised.  The  speed  of  structural  change  can  be 
approximated by an indicator that looks at changes 
in the shares of different industries in gross value-
added  or  in  employment  (Hansson  and  Lundberg 
1991). The indicator gets small values when most 
of  the  industries  grow  or  decline  at  the  same  rate 
and  large  values  when  changes  happen  in  few 
industries.  At  the  peak  of  the  crisis,  export  losses 
were  accompanied  by  a  rapid  decline  in  the 
production and employment in the electronics and 
paper  industries,  but  after  this  negative  shock  the 
production structure in the economy has remained 
rather stable.  

Graph 4.4.7:  Speed of structural change, Finland 

The short run indicator is a sum of (absolute) changes in 
employment shares. The long run indicator shows an 
average change of the employment structure over 1996-
2006 and 2006-2014. 
Source: European Commission 

The  losses  in  productivity  and  employment 
which  materialised  during  the  recession  in 
2012-2014  have  not  yet  been  reverted. 
Innovation  and  expansion  of  high  productivity 
is  needed,  which  would  generate 
activities 
favourable  structural  change,  but  the  indicators 
(see  Graph  4.4.7)  suggest  that  structural  change 
has  slowed  down.  Also  the  long-run  indicator, 
which  measures  the  changes  in  the  production 
structure  in  two  successive  periods  over  1996-
2014, indicates a slowdown in the speed of change. 

Graph 4.4.6:  Trade balance of goods according to broad 

economic classification of goods. 

Source: European Commission 

Intermediate products dominate goods exports. 
They  account  for  about  two  thirds  of  goods 
exports,  a  much  higher  proportion  than  the  EU 
average (somewhat below 50 %). Finland’s role in 
global  value  chains  is  predominantly  to  supply 
intermediate  goods  to  other  economies  such  as 
China,  Germany  and  Sweden.  Intermediate  goods 
also  account  for  a  large  share,  around  55 %,  of 
imports.  The  share  of  foreign  gross  value  added 
embedded  in  Finnish  manufacturing  value  added 
was  38 %  in  2011,  slightly  above  Sweden  and 
Denmark  (Ali-Yrkkö,  Rouvinen,  Sinko,  Tuhkuri 
2016). However, the foreign content of exports has 
increased more than in the neighbouring countries 
or in the EU on average in 1995-2011. On the one 
hand, this is a sign of deeper integration into global 
value  chains,  but  on  the  other  hand  means  that 
exports  create  less  domestic  value-added  and 
income  than  before.  China  and  the  United  States 
were  the  most  important  individual  countries  as 
export  markets  in  2011,  each  representing  around 
3 %  of  Finnish  GDP.  Exports  of  goods  and 
services to the EU as a whole accounted for almost 
10 % of GDP (Ali-Yrkkö et al. 2016). 

Exports  in  services  have  nearly  doubled  since 
the  early  2000s.  In  2015,  the  share  of  service 
exports (34) was at 11 % of GDP and accounted for 
30 %  of  total  exports.  Exports  of  ICT  services 
account  for  about  40 %  of  total  services  exports 

(34)  In national accounts terms, including trade of services and 

tourism. 

32 

-50510Capital goodsConsumption goodsFuelIntermediate goodsTOTAL% of GDP2000200520102015-6-4-20246896980002040608101214Short-run speed indicatorLong run share changeTotal hours worked, % y-o-y 
 
                                                           
 
4.4. Investment 

jobs  which  demand  tertiary  education  (education 
levels  5-8)  have 
increased.  The  manpower 
requirement index (35) shows that over recent years 
jobs  for  workers  with  basic  skills  have  declined 
while  the  demand  for  educated  workers  has 
increased.  This  has  possibly  worsened  matching 
problems  in  the  labour  market  and  could  partly 
explain  why  the  estimated  speed  of  structural 
change has slowed down in the past years.  

Graph 4.4.9:  Reorientation of the economy towards lower 

productivity industries 

The  speed  indicator  for  Finland  has  been  varying 
within  the  same  range  as  other  peer  countries’ 
indicators. The rise of the ICT sector in late 1990s 
and the deep decline of manufacturing in 2009 are 
periods when Finland stands out in this sample.  

to 

Aggregate labour productivity has deteriorated 
the  decline  of  high 
significantly  due 
productivity  industries.  The  orientation  of  the 
economy  towards  higher-productivity  industries 
was  apparent  in  the  late  1990s  and  early  2000s. 
The  structure  of  the  economy  started  to  shift 
towards  lower  productivity  sectors  already  in  the 
early  2000s.  The  decline  of 
the  paper  and 
electronics  industries  is  accelerated  2008  and  the 
productivity  drop  is  more  severe  than  in  peer 
economies  such  as  Sweden  (shorter)  or  Austria 
(not as steep) (see Graph 4.4.9). 

Graph 4.4.8:  Short-run speed of structural change, selected 

countries 

The graph illustrates how actual labour productivity 
compares to a counterfactual labour productivity using 
constant, average over 1995-2015, economic structure.  
Source: European Commission 

Table 4.4.1:  Changes in employment 2005-2015 by 

education and demand for more educated 
employment 

Education levels according to ISCED 2011: 
0-2  Early childhood, primary and lower secondary  
3-4 Upper secondary and post-secondary, non-tertiary  
5-8 Short-cycle tertiary, bachelor, master doctoral (or 
equivalent) 
Source: European Commission 

(35)  Following Uusitalo (1999) and references therein.  

Source: European Commission 

the  decline 

increased.  Reflecting 

Structural  changes  have  reduced  the  demand 
for labour in elementary occupations, while the 
number of jobs that require a higher education 
has 
in 
manufacturing,  jobs  in  elementary  occupations 
(ISCO08  class  9)  and  in  craft  and  related  trades, 
such  as  construction  workers  or  metal  and 
machinery  workers,  (ISCO08  class  7)  declined 
between  2005  and  2015.  Also  jobs  in  managerial 
occupations  declined  significantly,  while  expert 
jobs increased. Table 4.4.1 also illustrates the rapid 
decline  in  jobs  which  require  at  most  lower 
secondary  education  (education  levels  0-2),  while 

33 

0123456796980002040608101214FISEDKNLAT-20-15-10-505990103050709111315FISEDKNLATOccupation0-8 0-23-45-8Managers-6.6-4.5-3.9-11.2Professionals7.61.13.216.8Technicians and associate professionals1.91.11.33.2Clerical support workers-0.7-0.8-0.6-0.7Service and sales workers3.63.65.41.1Skilled agricultural, forestry and fishery workers-0.7-1.4-0.8-0.3Craft and related trades workers-1.3-1.6-2.0-0.2Plant and machine operators and assemblers-0.7-1.4-1.0-0.1Elementary occupations-1.8-3.6-2.2-0.2Total1.5-38.10.124.0Manpower requirement index-7.5-0.58.4Education levels 
 
 
 
 
 
 
                                                           
4.4. Investment 

4.4.2.  INVESTMENT OUTLOOK 

4.4.3.  BUSINESS ENVIRONMENT 

Investment  has  been  limited.  On  one  hand  the 
increased  labour  costs  and  weakened  terms  of 
trade have led to a deterioration of real unit labour 
costs.  Real  unit  labour  costs  give  an  indication  of 
companies’  profitability  which  has  fallen  and 
might  partly  explain  lower  investment.  On  the 
other hand, the Finnish export products might have 
fallen behind competitors’ products in quality and 
these  dimensions  were 
innovativeness.  Both 
discussed 
the  European 
Commission 2016 report.  

in  more  detail 

in 

few 

In  2014  a 

to  Finland 

Foreign  direct 
is 
investment 
increasing while in net terms Finland has more 
large 
investment  abroad. 
acquisitions  of  Finnish  companies 
increased 
foreign  direct  investment  (FDI)  into  Finland  to  a 
record high 13.4 billion euros  so FDI of about 1.3 
billion  euros  in  2015  might  seem  disappointing. 
However,  in  2015  the  number  of  companies 
investing  in  Finland  increased  from  the  previous 
year (36).  In  2015,  the  stock  of  inward  FDI  in 
Finland  was  about  74  billion  euros  while  Finnish 
outward  FDI  was  some  11  billion  euros  higher. 
Outward  FDI  decreased  as  net  investment  was 
negative, about -11.4 billion euros due to increased 
their  parent 
loans  by 
companies  in  home  country  (see  Section  on  the 
financial sector and non-financial corporates).  

foreign  affiliates 

to 

The  business  environment  is  an  important 
enabler  of  company  growth.  The  growth 
orientation of SMEs has  increased:  11 %  of  small 
and  medium-sized  enterprises  now  declare  that 
they  are  strongly  growth-oriented,  and  39 %  plan 
to grow as far as possible (Yrittäjät, 2016a). Their 
main challenges are weak demand in the domestic 
market and increased competition. To promote the 
internationalisation of Finnish firms, a government 
initiative  known  as  Team  Finland  provides 
services  such  as  market  research,  networking, 
training  and  business  development  support  and 
financing.  

regulation 

New legislation will support the introduction of 
new technologies, digitisation and new business 
concepts. As an example, the new Transport Code 
is  expected  to  promote  the  use  of  collaborative 
less 
business  models  by  making 
burdensome  and  enabling  market  access.  Another 
example is the guidance issued by the Ministry of 
Economic Affairs and Employment for short-term 
rented  accommodation.  It  covers  income  and 
for 
value-added 
providers,  minimum 
insurance 
requirements,  and  collection  of  users’  identity 
information  and  thus  increases  legal  certainty  and 
transparency. 

tax  declaration  obligations 

safety 

and 

Overall,  Finland  has  room  to  increase  foreign 
direct  investment.  Compared  for  example  with 
neighbouring  Sweden,  the  Finnish  FDI  stock-to-
GDP  is  currently  about  20  pps.  lower.  This  is  so 
despite  the  fact  that,  as  Finland  usually  performs 
well  in  global  competitiveness  rankings.  One 
reason for not attracting FDI inflows could be the 
small size of the domestic market. Finland, next to 
economically  larger  Sweden  with  more  or  less 
similar  structural  features  of  the  economy,  might 
not  be 
the  most  natural  choice  for  foreign 
investors.  Also,  a  lack  of  national  rules  and 
procedures for companies to directly transfer their 
registered offices into and out of Finland makes it 
more  difficult  and  costly  for  companies  to  take 
advantage of cross-border business opportunities. 

(36)  http://www.investinfinland.fi/-/number-of-foreign-owned-

companies-in-finland-grows-third-year-running 

34 

 
                                                           
 
4.4. Investment 

35 

 Box 4.4.1: Investment challengesMacroeconomic perspective  Real investment suffered significantly in the 2008-09 recession when investment fell so that it was the largest individual demand component contributing to the fall in real GDP (see Graph 1.1). This reflects, in part, the deterioration of the economic outlook but also the fact that the years 2007-08 before the crisis witnessed an investment boom in Finland. After a brief rebound in 2010-11, investment fell in 2012-2014, when investment in production facilities and commercial investment as well as research and development expenditure (or intangible investment) of non-financial corporations declined. In addition, real housing investment declined while public investment increased slightly. However, in 2015 real investment turned to a tepid growth driven by machinery and equipment investment by the corporate sector. Also housing construction started to grow. In 2016 machinery and equipment investment and construction were expected to have continued to expand. However, the growth has started to increase from very low levels. In real terms, investment was in 2015 still below the levels in 2009-2010. The investment-to-GDP ratio is currently subdued and close to one fifth, a few percentage points lower than in 2006. Assessment of barriers to investment and ongoing reforms  Table 1: Barriers to investment  Source: European Commission  Finland has preserved a good environment for doing business and cost-competitivenss is expected to improve as of 2017. The new wage-setting practices in line with the Competitiveness Pact are under discussion between the social partners (see Section 4.3). The government is working on improving the business environment further. 1/ The main barriers to investment are the cumulated loss of cost competitiveness and continued challenges in non-cost competitiveness. The Competitiveness Pact (see Box 1.1) is expected to lower wage costs for employees creating possibilities to take on economically feasible investment projects. Non-cost competitiveness issues such as declining economic activity in key export markets and shift of demand from products made in Finland to competitors' more innovative products are limiting production. This in turn is slowing down investment in production capacity. In this regard cuts to public and private R&D spending are unfortunate and could result in lower capacity to create new innovative export products in the future. 2/ Overall, the business environment could be more favourable for foreign and domestic investment. The government has pledged to reduce regulatory burden, also in services such as retail, to make the economy more flexible and the business environment more attractive (see Section 4.4.3). The government programme Team Finland on one hand supports growth of innovative start-ups and helps them to internationalise and on the other hand promotes Finland as location for foreign investment. Regulatory/ administrative burdenCSREPL & framework for labour contracts Business services / Regulated professionsPublic administrationCSRWages & wage settingCSRRetailCSRPublic procurement /PPPsEducation ConstructionJudicial systemTaxationDigital Economy / TelecomInsolvency frameworkAccess to financeEnergyCompetition and regulatory frameworkCooperation btw academia, research and businessTransportFinancing of R&D&INo barrier to investment identifiedNot assessed yetSome progressCSRInvestment barriers that are also subject to a CSRNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentLabour market/ EducationSector specific regulationFinancial Sector / TaxationR&D&I 
 
 
 
 
4.5. SECTORAL POLICIES 

4.5.1.  RESEARCH, DEVELOPMENT AND 

INNOVATION 

the  structure  of 

Since  cost  competitiveness  is  improving  thanks 
the  recent  wage  agreements,  non-cost 
to 
competitiveness 
issues  become  even  more 
important.  Retaking  the  path  towards  sustainable 
growth and renewed competitiveness will require a 
clear  focus  on  research  and  innovation  which 
should  increase  business  dynamism  and  help  to 
renew 
the  economy.  While 
Finland’s total R&D budget (2.9 % GDP in 2015, 
projected  to  marginally  decline  in  2016)  is  still 
among the highest in the world, it has decreased by 
15 %  in  2009-  2014.  The  decline  was  mainly 
caused  by  lower  investments  in  the  private  sector 
which  can  be  linked  to  economic  restructuring. 
The  share  of  manufacturing  in  total  value-added 
has  decreased  from  25.3 %  in  2007  to  17.0 %  in 
2015.  The  share  of  high-tech  manufacturing  has 
decreased from 7.3 % in 2007 to 3.0 % in 2015. 

Graph 4.5.1:  Total intramural R&D expenditure (GERD) by 
sectors of performance in Finland between 
2005 and 2014 

Source: European Commission 

Public  R&D  intensity  remained  almost  stable 
over  the  period  2007-2014  with  a  counter-
cyclical  expansion  in  expenditure  during  the 
crisis  years.  In  2015  public  R&D 
intensity 
dropped  below  1%,  bringing  it  back  to  the  pre-
crisis 
the  government’s  fiscal 
consolidation  programme.  Based  on  the  2016 
budget, 
innovation  expenditure 
decreased  9.4 %  in  comparison  to  2015.  Among 
the areas most concerned by the cuts are the R&D 

research  and 

levels  due 

to 

subsidies  to  businesses-driven  research,  mainly 
those  distributed  by 
the  Tekes  agency.  No 
evaluations that would demonstrate the impact and 
appropriateness  of  cuts  in  the  programmes  and 
other Tekes activities have been made. 

In  international  comparison,  subsidies  towards 
R&D  have  been  moderate.  Direct  government 
funding of business R&D as a percentage of GDP 
amounted  to  only  0.06 %  in  2014  (OECDd). 
Subsidies are replaced by soft loans to businesses, 
so 
these  could  become  commercially 
successful  on  a  global  level.  The  government  is 
also  experimenting  with  new  programmes  in 
growth 
technology, 
biotechnology and digitalisation, but these are on a 
relatively small-scale. 

clean 

areas 

such 

that 

as 

innovation 

In  the  2016  European  Innovation  Scoreboard, 
Finland  remains  an 
leader.  Its 
innovation  performance  has,  however,  decreased 
since 2010. Its performance has deteriorated based 
on  a  number  of  indicators,  notably  innovative 
SMEs  collaborating  with  others,  non-R&D 
innovation  expenditures  and  venture  capital. 
Nevertheless,  Finland  still  has  clear  strengths  in 
international scientific co-publications, licence and 
patent  revenues  from  abroad,  patent  applications 
and public-private co-publications. 

Some  of  the  resources  put  into  public  research 
do  not  lead  to  high  quality  results.  In  terms  of 
highly  cited  publications  (share  of  these  in  total 
publications  of  the  country),  Finland  only  ranked 
11th  in  the  EU.  Public-private  cooperation  also 
shows a worrying declining trend, with the amount 
of  public  R&D  expenditure  financed  by  business 
declining  from  0.08 %  of  GDP  in 2007  to  0.05 % 
GDP in 2014.  

funding  of 

The  choices  made  by  the  government  in  the 
to 
led 
fiscal  consolidation  process  have 
relatively  higher 
fundamental 
research.  Encouraging  the  commercialisation  of 
research  output  also  features  prominently  on  the 
policy agenda. The streamlining of profiles and the 
division  of  labour  between  higher  education  and 
research institutes is also a policy priority. In 2017 
further  changes  are  planned  to  the  funding  model 
for universities. Part of the institutional funding of 
universities  has  already  been  re-allocated  to  the 
Academy of Finland to facilitate strategic choices. 

36 

00.511.522.533.5420052006200720082009201020112012201320142015Business R&DGovernment R&DHigher Educationno-profit 
 
 
4.5. Sectoral policies 

remain  the  fourth  highest  in  the  EU  (Eurostat, 
2015). 

Retail  trade  has  been  highly  regulated  but 
recently  steps  towards  lowering  the  regulation 
have  been  taken.  After  liberalising  the  opening 
hours  from  the  start  of  2016,  the  proposed 
amendments  to  the  Land  Use  and  Building  Act 
increase the threshold of retail establishments to be 
classified  as  ‘large’  from  2000  to  4000  m2.  This 
should  provide  more  flexibility  for  retailers  in 
adapting  their  store  formats  to  the  needs  of 
consumers. However, it is necessary to ensure that 
the changes are correctly implemented at the local 
level,  given  the  fact  that  planning  powers  were 
recently  entirely  conferred  on  municipalities.  In 
addition,  the  government  is  planning  to  liberalise 
alcohol policy. The proposal is expected to bring a 
certain share of sales from state-owned Alko shops 
to the other retailers and reduce the dependence of 
other  retailers  on  the  location  decisions  of  Alko 
shops.  

The taxi sector is to be reformed. As part of the 
first stage of the unified Transport Code (cf. 4.5.4), 
the  government  has  presented  proposals 
to 
facilitate  market  entry  in  the  taxi  sector,  enable 
new  business  models,  and 
remove  national 
regulation  limiting  competition.  In  particular,  the 
current  quotas  on  taxis  by  geographical  zone  of 
operation are proposed to be abolished in order to 
facilitate  access 
to  markets,  expansion  of 
operations  and  more  efficient  use  of  vehicles. 
Similarly,  taxi  transport  licences  would  no  longer 
require having followed a transport operator course 
and at least six months experience of driving taxis. 
Instead  of  being  issued  for  specific  vehicles  as  is 
currently the case, they would be operator-specific 
and  available  to  operators  holding  passenger  or 
goods 
taxi 
licences  and 
transport requirements. This change is intended to 
make it easier to enter the taxi market and develop 
new  services  and  business  models.  Moreover,  the 
regulation  of  taxi  fares  would  be  replaced  by  a 
system  of  flexibly  set  fares,  communicated  to 
journey; 
customers  before 
provisions 
to  determine  maximum  fares  are 
however  expected  to  remain  in  place.  Finally,  the 
formal  requirements  on  taxi  drivers  are  proposed 
be  eased  and  a  wider  definition  of  what  vehicles 
can be used to provide taxi services is envisaged. 

the  start  of 

fulfilling 

transport 

the 

been 

have 

pursuing 

Universities 
the 
commercialisation  of  research  output.  This  has 
been  achieved  through  the  creation  of  spin-offs 
and  by  significant  investment  into  the  innovation 
capacity  of  the  start-up  ecosystem.  However,  the 
share  of  high-growth  enterprises  categorised  as 
innovative  is  slightly  lower  than  the  EU  average. 
Also  in  terms  of  the  average  size  of  high-growth 
businesses measured in employment, Finland falls 
behind the EU average (Costa et al 2016). 

The  government’s  programme  for  2015-19 
focuses research and innovation policy strongly 
on  university-business  collaboration  and  the 
creation  of  an  efficient  national  research 
system.  While  the  budgetary  restrictions  have  a 
and 
impact  on 
distortionary 
to  be 
innovation  ecosystem  which  needs 
the 
thoroughly  assessed, 
government 
is 
remarkably  progressive  and  forward-looking.  Yet, 
the  lack  of  justification  for  budgetary  cuts  and 
limited cooperation with the main stakeholders can 
be  assessed  as  posing  a  threat  to  the  success  of 
reforms. 

taking  by 
experimentation 

the  risk 

research 

policy 

the 

on 

4.5.2.  COMPETITION IN PRODUCT AND SERVICE 

MARKETS 

increased 

its  market  share, 

The  concentration  of  the  grocery  retail  market 
remains very high. (37) Although the third largest 
the 
retailer  has 
dominance  of  the  two  leading  local  retailers  has 
not significantly changed and is still very high  — 
also  as  a  result  of  the  acquisition  of  Suomen 
Lähikauppa by Kesko, the second largest retailer in 
the country.  

Consumer  prices  have  fallen  but  remain  high. 
Fierce  price  competition  between the retail chains 
has  recently  led  to  a  continuous  fall  in  prices  of 
daily consumer goods, as reported by the Ministry 
of  Finance  in  its  Economic  Survey  for  autumn 
2016 (VM, 2016a). The Eurostat price level index 
for food and non-alcoholic beverages has dropped, 
moving  Finland  slightly  closer  to  the  EU  average 
but  the  prices  for  these  product  categories  still 

(37)  Euromonitor (2016). The five largest grocery retailers hold 
95 %  of  the  Finnish  market,  with  the  two  market  leaders 
accounting for nearly 80 %. 

37 

 
                                                           
4.5. Sectoral policies 

remain 

regarding 

reduce  greenhouse  gas  emissions.  However,  some 
uncertainties 
the  adequacy 
between  the  envisaged  policy  measures,  notably 
for  wind  power,  and  the  government’s  objectives. 
Public  finance  implications  have  been  assessed. 
According to government estimates, public support 
required  by  the  strategy  would  increase  central 
government  expenditure  by  approximately  160–
240 million euros in 2018-2020 and by 930 million 
euros  during  2021  to  2030.  Energy  related  tax 
revenue  would  decrease  by  ca  1.4  billion  euros 
over the strategy's horizon as energy use decreases. 

importer  and 

is  an  electricity 

The  electricity  market 
is  working  well. 
Concentration  on  the  power  generation  market  is 
low.  There  is  also  a  widespread  deployment  of 
smart  meters,  and  high  annual  switching  rates  by 
consumers from one electricity supplier to another. 
Finland 
lacks 
sufficient  interconnector  capacity  to  the  Nordic 
and  Baltic  neighbours,  especially  Sweden.  The 
wholesale  price  of  electricity  remains  higher  than 
in the other Nordic countries. Ways to address this 
of 
problem 
the 
of 
capacity, 
interconnection 
additional  generation  capacity  and  promoting 
energy  efficiency.  The  latter  is  important  as  the 
energy intensity of the economy is well above EU 
average and progress has been limited over the last 
10  years.  High  energy  intensity  can  be  partly 
explained  by  climatic  and  structural  factors 
(energy 
sector). 
intensive  pulp  and  paper 
Regarding additional generation capacity, potential 
delays  have  been  announced  in  the  completion  of 
the new nuclear power plant project Olkiluoto-3. 

improvement 
development 

include 

financing 

agreement 

Competition  in  the  gas  market  is  currently 
lacking. The market is tightly regulated as there 
is  no  liberalised  wholesale  market  and  end-
users have no choice of supplier. The situation is 
meant  to  improve  thanks  to  the  building  of  new 
external  gas  connections.  The  Connecting  Europe 
Facility’s 
the 
Balticconnector  pipeline  project  has  ensured 
agreement for the construction of this gas pipeline 
linking  Finland  and  Estonia.  Together  with  the 
construction  of  small-scale  liquefied  natural  gas 
projects, this will enable the diversification of gas 
providers.  A  first  local  LNG  terminal,  aimed 
mainly for ships and local industry, was opened in 
2016 
that  basis, 
the  port  of  Pori.  On 
amendments  to  the  Natural  Gas  Market  Act  are 
now under preparation. The new Act is expected to 

on 

in 

Changes  to  the  regulation  and  roles  of  both 
hospital  and  private  pharmacies  are  being 
discussed,  related  to  the  reform  of  social  and 
healthcare  services.  The  private  pharmacy  sector 
is  strictly  regulated,  including  limitations  on  the 
number  of  branches  per  pharmacy  (up  to  three 
branches  per  private  pharmacy; 
the  Helsinki 
university pharmacy is however allowed to operate 
up  to  16  branches)  and  the  ownership  of  the 
pharmacies. There has been a public debate about 
reform of the pharmacy sector, however a political 
decision  has  not  been  made 
the 
fundamentals  of  the  system.  The  government  has 
conducted  a  public  consultation  on  the  rules 
governing  transfer  of  ownership  of  pharmacies  as 
well  as  the  retail  sale  of  non-pharmaceutical 
products in pharmacies.  

to  change 

4.5.3.  ENERGY, RESOURCES AND CLIMATE 

CHANGE 

its  2020 

Finland is broadly on track to reach its Europe 
2020 energy targets, but to ensure fulfilment of 
the  climate  target  additional  measures  appear 
to be required. The share of renewable energy in 
gross final energy consumption reached 39.5 % in 
2015,  already  exceeding 
target.  In 
addition, primary and final energy consumption in 
2015  were  already  below  their  2020  energy 
efficiency  targets.  The  promotion  of  renewable 
energy  and  energy  efficiency  is  also  a  way  of 
energy. 
reducing  dependency  on 
Regarding greenhouse gas emissions, according to 
the national projections, the reduction in emissions 
in  the  non-ETS  sector  by  2020  is  exactly  16 % 
(same as its commitment), implying that, unless it 
adopts new policies, it is not certain that the target 
will be met. 

imported 

The  government  approved  a  new  national 
to  2030  on 
energy  and  climate  strategy 
24 November  2016.  The  strategy  has  been 
submitted  as  a  Government  report  to  the 
parliament.  The  strategy  sets  out  concrete 
measures and goals to reach the energy and climate 
goals  for  2030,  with  the  aim  of  aligning  the 
strategy  to  the  overall  EU  objectives.  Such  goals 
include  increasing  the  share  of  renewable  energy 
above  50 %  in  the  2020s,  promoting  the  use  of 
transport 
advanced  biofuels,  and  encouraging 
is 
electrification.  The  government’s  proposal 
to 
to  promote  cost-effective  measures 
meant 

38 

 
4.5. Sectoral policies 

open  up  wholesale  and 
to 
competition  and  improve  the  competitiveness  of 
natural  gas  by  reducing  rules  applying  to  natural 
gas companies.  

retail  markets 

4.5.4.  OTHER NETWORK INDUSTRIES 

the 

Linked 

Reform of the domestic postal services has been 
initiated. 
government’s 
to 
digitalisation  and  better  regulation  agenda,  the 
Ministry  of  Transport  and  Communications  has 
initiated  a  two-stage  project  to  reform  legislation 
governing  postal  services.  The  goal  is  to  make 
postal services more flexible and better adapted to 
the  needs  of  the  changing  business  environment 
(LVM, 2016a).  

Transport market regulations will be reformed 
through the introduction of a unified regulatory 
act  (Transport  Code).  The  reform  will  be 
implemented  in  three  stages.  The  first  stage 
includes  provisions  on  road  transport  and  better 
interaction  between  all  modes  of  transport.  Later 
stages  include  provisions  on  air,  sea  and  rail 
transport  markets  as  well  as  on  transportation 
services. The first phase of the reform is intended 
to  enter  into  force  on  1 July  2018  to  enable  the 
transport  sector  to  prepare  for  the  new  rules.  The 
Transport  Code  envisages  that  essential  data  on 
transport  services  are  made  open,  laying  down 
provisions  for  the  interoperability  of  ticket  and 
payment  systems.  This  is  expected  to  facilitate 
combinations of different transport services (LVM, 
2016b). 

39 

 
4.6. PUBLIC ADMINISTRATION 

4.6.1.  REGULATORY FRAMEWORK 

digitalised. The funding in 2016-18 is expected to 
amount to 100 million euros.  

The  government  has  stated  its  intention  to 
abolish  detailed  qualification  requirements  for 
municipal  staff.  The  aim  is  to  focus  recruitment 
policies more towards skills and competencies than 
requirements.  Municipal 
formal  qualification 
positions involving the exercise of public authority 
will  be  the  exception  as  there  will  be  specific 
legislation 
requirements. 
Abolishing  detailed  qualification  requirements  in 
focus  more  on  skills  and 
most  cases 
competencies  is  part  of  a  plan  to  cut  costs  by  1 
billion euros in municipalities (OKM, 2015). 

qualification 

on 

to 

Public  procurement  functions  well  in  Finland. 
All  notifications  are  published  electronically. 
Electronic auctioning is used in less than 1 % of all 
contract  award  notices.  Public  procurement 
contracts are in most cases awarded on the basis of 
quality  and  value  for  money,  not  based  on  the 
lowest price (the latter is used in 46 % of contracts, 
lower  than  the  EEA  average  of  64 %).  However, 
Commission  data  indicate  that  transparency  is  an 
issue  as  contract  award  notices  are  not  always 
published. 

The  public  procurement  system  could  do  with 
faster  review  procedures.  Review  procedures  at 
the  Market  Court  are  relatively  time-consuming, 
the average time for a review decision being eight 
months. In most other EU Member States, review 
bodies  deliver  their  decisions  within  one  to  three 
months.  

regulatory 

times  costly 

environment 
for 

is 
Finland’s 
the 
transparent  but  at 
businesses. Costs affected by the regulation are in 
particular  significant  for  start-ups  and  SMEs. 
Larger  companies  are  generally  coping  with  the 
excessive regulation better and in some cases even 
see  it  as  a  competitive  advantage  that  keeps  the 
new entrants out of market.  

The ’think small first’ principle, which aims at 
making  policy  and  legislative  initiatives  SME-
friendly,  is  not  systematically  applied  to  new 
and  existing  legislation.  At  the  same  time  SMEs 
are a specific focus group in many new initiatives. 
frequent 
entrepreneurs 
Moreover, 
changes 
legislation  as  a  problem  (Prime 
Minister’s Office, 2016b). More focus should also 
be put on facilitating small businesses’ compliance 
with  rules  and  regulations.  In  specific  areas, 
decreased public spending, together with structural 
changes 
the  provision  of  public  services 
(towards larger units) make it difficult for SMEs to 
participate in public procurement tenders. 

consider 

in 

in 

The  government  has  set  up  an  independent 
Council of Regulatory Impact Analysis in order 
to  improve  the  quality  of  impact  assessments 
accompanying  government  proposals.  The 
current members are appointed for three years until 
2019.  The  Council  has  already  started  to  produce 
opinions, among others on the draft amendments to 
the Land Use and Building Act (cf. 4.5.2) and the 
Postal Act (cf. 4.5.4), as well as on a proposed new 
tax deduction for entrepreneurs (VM, 2016b). 

4.6.2.  EFFICIENCY OF PUBLIC ADMINISTRATION 

The  public  administration  is  efficient.  Studies 
point to Finland as an efficient and low corruption 
country.  Efficiency  of  public  administration  has 
not  been  demonstrated  as  a  factor  hampering 
investment 
decisions. 
Nevertheless, there is some room for improvement.  

employment 

or 

Among  the  key  projects  of  the  government  is 
the digitalisation of public services. The first step 
is  the  development  of  the  common  principles  for 
all  digital  public  services.  Also,  all  internal 
to  be 
processes  within 

the  government  are 

40 

 
 
 
ANNEX A 

Overview Table 

Commitments 

Summary assessment(38) 

2016 Country-specific recommendations (CSRs) 

CSR 1: Achieve an annual fiscal adjustment of at 
least  0,5 %  of  GDP  towards  the  medium-term 
budgetary  objective  in  2016  and  0,6 %  in  2017. 
Use any windfall gains to accelerate the reduction 
of  the  general  government  debt  ratio.  Ensure 
timely  adoption  and 
the 
administrative  reform  with  a  view  to  better  cost-
effectiveness of social and healthcare services. 

implementation  of 

Achieve an annual fiscal adjustment of at least 0,5 
%  of  GDP  towards  the  medium-term  budgetary 
objective  in  2016  and  0,6  %  in  2017.  Use  any 
windfall  gains  to  accelerate  the  reduction  of  the 
general government debt ratio. 

Ensure timely adoption and implementation of the 
administrative  reform  with  a  view  to  better  cost-
effectiveness of social and healthcare services. 

Finland  has  made  some  progress  is  addressing 
the  CSR 1  (this  overall  evaluation  excludes  an 
assessment  of  compliance  with  the  Stability  and 
Growth Pact).  

The compliance assessment with the Stability and 
Growth Pact will be included in Spring when final 
data for 2016 will be available. 

  Some  progress  has  been  made  on 

the 
adoption and implementation of the social and 
healthcare  reform.  The  reform  has  been 
undertaken  in  order  to  ensure  the  continued 
access  to  the  good  quality  services  while 
ensuring the long-term sustainability of public 
finances.  The  government  has  prepared  the 
first half of the draft legislation that is needed 
for  the  reform  to  take  effect  from  2019.  The 
laws  have  undergone  a  public 
27  draft 
consultation.  Legislation 
the 
freedom of choice for the citizens was not part 

regarding 

(38)  The  following  categories  are  used  to  assess  progress  in  implementing  the  2016  country-specific  recommendations: 
No progress: The Member State has not credibly announced nor adopted any measures  to address the CSR. Below a number of 
non-exhaustive typical situations  that could be covered under this, to be interpreted on a case by case basis taking into account 
country-specific conditions: 

•  no  legal,  administrative,  or  budgetary  measures  have  been  announced  in  the  National  Reform  Programme  or  in  other  official 
communication  to  the  national  Parliament  /  relevant  parliamentary  committees,  the  European  Commission,  or  announced  in 
public (e.g. in a press statement, information on government's website);  
• no non-legislative acts have been presented by the governing or legislator body;   
•  the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or  setting  up  a  study  group  to 
analyse possible measures that would need to be taken (unless the CSR explicitly asks for orientations or exploratory actions), 
while clearly-specified measure(s) to address the CSR has not been proposed. 

Limited progress: The Member State has: 
• announced certain measures  but these only address the CSR to a limited extent;    
and/or 
• presented legislative acts in the governing or legislator body but these have not been adopted yet and substantial non-legislative 

further work is needed before the CSR will be implemented;  

• presented non-legislative acts, yet with no further follow-up in terms of implementation which is needed to address the CSR. 
Some progress: The Member State has adopted measures that partly address the CSR  
and/or  
the Member State has adopted measures that address the CSR, but a fair amount of work is still needed to fully address the CSR as 
only  a  few  of  the  adopted  measures  have  been  implemented.  For  instance:  adopted  by  national  parliament;  by  ministerial 
decision; but no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way in addressing the CSR and most of which have 

been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

41 

 
 
 
 
 
                                                           
A. Overview Table 

the 

of the public consultation. The work needs to 
continue, but thanks to the timely preparation 
of 
new 
administrative  structure,  it  can  be  concluded 
that  there  is  some  progress  in  implementing 
the recommendation. 

legislation 

creating 

the 

CSR 2:  While  respecting  the  role  of  social 
partners,  ensure  that  the  wage  setting  system 
enhances  local  wage  bargaining  and  removes 
rigidities,  contributing  to  competitiveness  and  a 
more  export 
industry-led  approach.  Increase 
incentives to accept work and ensure targeted and 
sufficient 
labour  market  measures, 
including  for  people  with  a  migrant  background. 
Take  measures  to  reduce  regional  and  skills 
mismatches.  

active 

While  respecting  the  role  of  social  partners, 
ensure  that  the  wage  setting  system  enhances 
local  wage  bargaining  and  removes  rigidities, 
contributing to competitiveness and a more export 
industry-led approach. 

Increase  incentives  to  accept  work  and  ensure 
targeted  and  sufficient  active  labour  market 
measures,  including  for  people  with  a  migrant 
background. 

Finland  has  made  some  progress  in  addressing 
the CSR 2: 

Substantial progress has been made in ensuring 
that the wage-setting system enhances local wage 
bargaining and removes rigidities, contributing to 
competitiveness  and  a  more  export  industry-led 
approach.  The  social  partners  agreed  on  the 
Competitiveness  Pact,  which  also  extends  the 
possibilities  for  local  bargaining.  A  new  wage-
setting  model  is  being  negotiated  for  the  next 
round  of  wage  negotiations,  where  wages  in  the 
tradable  sector  serve  as  an  anchor  for  the  rest  of 
the  economy.  The  extent  to  which  there  will  be 
local  bargaining 
results  from 
possibilities remains to be seen.  

the  extended 

Some  progress  has  been  achieved  on  incentives 
to accept work and ensure targeted and sufficient 
active  labour  market  measures,  including  for 
people  with  a  migrant  background.  To  increase 
incentives to accept work among parents of young 
children,  the  government  has  proposed  in  the 
2017  budget  the  reduction  of  fees  for  early 
childhood  education.  From  the  benefits  side, 
Finland  has  tightened  the  obligation  to  accept  a 
job  offer  and  the  obligation  to  participate  in 
activation  schemes.  The  duration  of  earnings-
related  unemployment  insurance  was  reduced  by 
one  fifth  to  400  days.  From  2017,  mandatory 
interviews with all the unemployed will be carried 
out  at  three-month  intervals  to  monitor  progress 
individual  employment  plans.  The 
with 
introduced  additional 
government  has  also 

the 

42 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

funding  for  migrants'  integration  and  a  new 
measure  offering  immigrants  training  that  will 
support their employability.  

Some  progress  has  been  achieved  in  the  area  of 
reducing  regional  and  skills  mismatches.  The 
reform  of 
the  vocational  education  system, 
expected to be finalised in 2018 includes making 
it  more  responsive  to  labour  market  needs.  The 
rules  regarding  acceptable  commuting  distance 
for 
the 
unemployment  benefit  can  be  used  as  a  mobility 
allowance.  

jobseekers  will  be 

stricter 

and 

Finland  has  made  some  progress  in  addressing 
the CSR 3:  

retail. 

increases 

including 

legislation 

Some progress has been made on competition in 
services, 
Establishment 
conditions  for  retail  outlets  will  be  eased.  The 
proposed 
the  minimum 
surface  of  the  more  tightly  regulated  large  retail 
units  from  2 000  to  4 000  square  meters.  The 
possibilities to establish these units in areas other 
than the city centres will be increased and access 
to outlets will become a more important factor in 
the  planning  than  the  outlet’s  nature  and  size. 
Transport  and  gas  market  reforms  have  been 
announced and the draft legislation prepared.  

  Some  progress  has  been  made  on 

to 

In 

order 

the 
promotion of entrepreneurship and investment 
and  fostering  growth  of  high  value  added 
promote 
production. 
entrepreneurship, the government put forward 
a  subsidy  (grant  or  a  wage  subsidy)  for  one-
person  companies  to  hire  a  worker,  reviewed 
the rules that guide the recruitment of foreign 
specialists  and 
the  creation  of  a  public 
database  of  inventions  that  everyone  can 
access and exploit. An innovation voucher for 
SMEs  is  in  preparation,  aimed  at  promoting 
the use of outside expertise in innovating and 
services.  The 
improving 

products 

or 

Take  measures  to  reduce  regional  and  skills 
mismatches. 

in  services, 
entrepreneurship 

CSR 3:  Continue  pursuing  efforts  to  increase 
competition 
in  retail. 
investment, 
Promote 
including  by 
and 
regulatory burden, to foster growth of high value 
added production.  

including 
and 

administrative 

reducing 

Continue pursuing efforts to increase competition 
in services, including in retail. 

entrepreneurship 

investment, 
Promote 
including  by 
and 
regulatory burden, to foster growth of high value 
added production. 

administrative 

reducing 

and 

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview Table 

Europe 2020 (national targets and progress) 

Employment rate (%):78 % 

government also plans to combine the existing 
public  support 
into  a  single 
instruments 
‘growth service’. 

The  employment  rate  was  73.3 %  in  2013  and 
declined to 73.1 % in 2014 and further declined to 
72.9 %  in  2015.  The  ambitious  target  on  the 
to  meet, 
employment  rate  will  be  difficult 
especially  considering  the  continuous  negative 
trend. 

Research and development target: 4% of GDP 

2.9 % (2015) 

a 

No  progress  towards  the  target.  Public  R&D 
intensity  has  remained  almost  stable  over  the 
period  2007-2014  with 
counter-cyclical 
expansion  in  expenditure  during  the  crisis  years. 
In 2015 public R&D intensity dropped below 1%, 
bringing  it  back  to  the  pre-crisis  levels.  Private 
expenditure  on  R&D  as  share  of  GDP  decreased 
from 2.42 % in 2007 to 1.94 % in 2015. Finland is 
unlikely  to  reach  its  national  target  for  2020  as 
expenditure is still decreasing. 

The  early  school  leaving  rate  increased  from 
9.3 %  in  2013  to  9.5 %  in  2014,  but  declined  to 
9.2 % in 2015. It was below the EU average value 
of  11.0 %  in  2015.  There  are  significant  gender 
differences (rate is higher for boys).  

Finland’s tertiary educational attainment rate was 
45.5 % in 2015 compared with a figure of 45.3 % 
in  2014  and  45.1 %  in  2013,  when  measured 
according to the EU definition of the indicator.  

The  number  of  people  at  risk  of  poverty  and 
social  exclusion  in  2015  was  904 000,  compared 
with 927 000 in 2014. As the number of people at 
risk  of  poverty  has  remained  close  to  900 000 
over the last decade, it will be challenging to meet 
the target by 2020. 

Early school leaving target: 8 % 

Tertiary education target: 42 % 

Target  for  reducing  the  population  at  risk  of 
poverty or social exclusion: 150 000 (compared to 
910 000 in 2008) 

44 

 
A. Overview Table 

2020 Renewable energy target: 38 % 

The  share  of  renewable  energy  in  gross  final 
energy  consumption  reached  39.5%  in  2015(39), 
already 
target.  The 
contribution of heating and cooling, with almost a 
52% RES-share for that sector, is significant.  

the  2020 

exceeding 

Energy efficiency target. 

Finland  has  set  and  indicative  national  energy 
efficiency  target  of  310  TWh,  which  implies 
reaching  a  2020  level  of  35.9 Mtoe  primary 
consumption 
energy 
and  26.7 Mtoe 
consumption. 

final 

Finland  reduced  its  primary  energy  consumption 
by -4.6% from 33.57 Mtoe in 2014 to 32.03 Mtoe 
in 2015. Final energy consumption decreased by -
1.3%  from  24.5  Mtoe  in  2014  to  24.18  Mtoe  in 
2015. 

Even  if  Finland   has  already  achieved  levels  of 
primary  and  final  energy  consumption  which  are 
below  the  indicative  national  2020  targets  (35.9 
Mtoe  in  primary  energy  consumption  and  26.7 
Mtoe in final energy consumption) it would need 
to make an effort to keep these levels until 2020. 

Greenhouse gas emissions target 2020:  

2020 target: -16 % 

-16%  in  2020  compared  to  2005  (in  non-ETS 
sectors)  

According  to  the  latest  national  projections  and 
taking  into  account  existing  measures,  the  target 
is expected to be achieved with no margin: -16 % 
in 2020 compared to 2005. 

Non-ETS 2015 target: -9 %. 

Based on proxy data, the non-ETS greenhouse gas 
emissions  between  2005  and  2015  decreased  by 
11 %;  which  means  2  pps  below  the  2015  target 
set by the Effort Sharing Decision. 

(39)  Renewable energy shares for 2015 are approximations and not official data, reflecting the available data (04.10.2016). See the 
the  2016  Report  on  Renewable  Energy,  

in  Realisation  of 

Öko-Institut  Report:  Study  on  Technical  Assistance 
http://ec.europa.eu/energy/en/studies 

45 

 
 
 
 
 
 
 
 
  
 
 
                                                           
ANNEX B 

MIP Scoreboard 

Table B.1: 

The MIP Scoreboard for Finland 

Flags: p: provisional.           

Source: European Commission, Eurostat and Directorate General for Economic and Financial Affairs (for Real Effective 
Exchange Rate), and International Monetary Fund          

46 

Thresholds201020112012201320142015Current account balance, (% of GDP) 3 year average-4%/6%1.80.5-0.8-1.8-1.6-1.0-35%16.515.111.73.9-2.60.6Real effective exchange rate - 42 trading partners, HICP deflator3 years % change±5% & ±11% -1.2-2.8-8.20.12.62.3Export market share - % of world exports5 years % change-6%-19.3-23.3-30.8-30.8-25.1-20.5Nominal unit labour cost index (2010=100)3 years % change9% & 12% 13.29.46.09.17.93.66%4.80.0-0.4-1.3-1.8-0.414%7.33.67.42.80.89.5133%148.9145.4148.6147.7147.4155.760%47.148.553.956.560.263.6Unemployment rate3 year average10%7.78.18.07.98.28.816.5%9.228.4-0.6-11.88.81.5-0.2%-1.1-1.10.20.70.50.60.5%0.50.50.2-0.30.20.72%4.93.6-2.5-1.50.43.4Activity rate - % of total population aged 15-64 (3 years change in p.p)Long-term unemployment rate - % of active population aged 15-74 (3 years change in p.p)Youth unemployment rate - % of active population aged 15-24 (3 years change in p.p)External imbalances and competitivenessNew employment indicatorsNet international investment position (% of GDP)Deflated house prices (% y-o-y change)Total financial sector liabilities (% y-o-y change)Private sector credit flow as % of GDP, consolidatedPrivate sector debt as % of GDP, consolidatedGeneral government sector debt as % of GDPInternal imbalances 
 
 
 
 
 
 
ANNEX C 

Standard Tables 

Table C.1: 

Financial market indicators 

Notes:  
1) Latest data Q2 2016. 
2) Quarterly values are not annualised 
* Measured in basis points. 

Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

47 

201120122013201420152016Total assets of the banking sector (% of GDP)327.3300.5258.3282.1265.9277.3Share of assets of the five largest banks (% of total assets)80.979.084.179.875.0-Foreign ownership of banking system (% of total assets)70.366.664.466.861.9-Financial soundness indicators:1)              - non-performing loans (% of total loans)0.80.80.71.41.31.3              - capital adequacy ratio (%)14.417.216.317.523.823.6              - return on equity (%)2)7.68.98.19.18.34.2Bank loans to the private sector (year-on-year % change)8.57.16.33.80.20.7Lending for house purchase (year-on-year % change)6.65.62.31.72.52.3Loan to deposit ratio142.3139.9139.2139.6136.7139.8Central Bank liquidity as % of liabilities1.01.31.10.40.31.2Private debt (% of GDP)145.4148.6147.7147.4155.7-Gross external debt (% of GDP)1) - public41.847.845.953.952.151.6    - private43.443.743.743.948.544.3Long-term interest rate spread versus Bund (basis points)*39.839.129.228.622.428.1Credit default swap spreads for sovereign securities (5-year)*49.256.425.124.020.624.4 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Labour market and social indicators 

Notes:       
1) The unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within 2 weeks.       
2) Long-term unemployed are those who have been unemployed for at least 12 months.       
3) Not in education employment or training.       
4) Average of first three quarters of 2016. Data for total unemployment and youth unemployment rates are seasonally 
adjusted.       

Sources: Sources:  
European Commission (EU Labour Force Survey).       

48 

201120122013201420152016 4Employment rate(% of population aged 20-64)73.874.073.373.172.973.5Employment growth (% change from previous year)1.30.9-0.7-0.5-0.40.5Employment rate of women(% of female population aged 20-64)71.972.571.972.171.871.8Employment rate of men (% of male population aged 20-64)75.675.574.774.073.975.1Employment rate of older workers (% of population aged 55-64)57.058.258.559.160.061.4Part-time employment (% of total employment, aged 15-64)14.114.114.014.114.115.0Fixed-term employment (% of employees with a fixed term contract, aged 15-64)15.515.515.315.415.115.9Transitions from temporary to permanent employment28.730.934.528.023.9:Unemployment rate1 (% active population, age group 15-74)7.87.78.28.79.48.9Long-term unemployment rate2 (% of labour force)1.71.61.71.92.32.3Youth unemployment rate (% active population aged 15-24)20.119.019.920.522.420.5Youth NEET3 rate (% of population aged 15-24)8.48.69.310.210.6:Early leavers from education and training (% of pop. aged 18-24 with at most lower sec. educ. and not in further education or training)9.88.99.39.59.2:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)46.045.845.145.345.5:Formal childcare (30 hours or over; % of population aged less than 3 years)20.022.021.023.0:: 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and social indicators (continued) 

Notes:       
1) People at risk of poverty or social exclusion : individuals who are at risk of poverty and/or suffering from severe material 
deprivation and/or living in households with zero or very low work intensity.       
2) At-risk-of-poverty rate : proportion of people with an equivalised disposable income below 60 % of the national equivalised 
median income.        
3) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone.       
4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
5) For EE, CY, MT, SI and SK, thresholds in nominal values in euros; harmonised index of consumer prices = 100 in 2006 (2007 
survey refers to 2006 incomes)       

Sources: Sources:  
For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.   

49 

Expenditure on social protection benefits (% of GDP)201020112012201320142015Sickness/healthcare7.27.27.47.57.5:Disability3.43.33.43.43.4:Old age and survivors11.211.211.912.513.0:Family/children3.23.13.23.33.2:Unemployment2.32.02.02.32.6:Housing0.50.50.50.60.6:Social exclusion n.e.c.0.80.80.90.90.9:Total28.528.129.330.331.1:of which: means-tested benefits1.21.31.51.61.8:Social inclusion indicators201020112012201320142015People at risk of poverty or social exclusion1 (% of total population)16.917.917.216.017.316.8Children at risk of poverty or social exclusion  (% of people aged 0-17)14.216.114.913.015.614.9At-risk-of-poverty  rate2 (% of total population)13.113.713.211.812.812.4Severe material deprivation rate3  (% of total population)2.83.22.92.52.82.2Proportion of people living in low work intensity households4 (% of people aged 0-59)9.310.09.39.010.010.8In-work at-risk-of-poverty rate (% of persons employed)3.73.93.83.73.73.5Impact of social transfers (excluding pensions) on reducing poverty51.550.050.955.353.653.7Poverty thresholds, expressed in national currency at constant prices5119401200512082120091196511852Gross disposable income (households; growth %)4.04.32.92.90.61.4Inequality of income distribution (S80/S20 income quintile share ratio)3.63.73.73.63.63.6GINI coefficient before taxes and transfers47.748.448.248.549.149.2GINI coefficient after taxes and transfers25.325.825.925.425.625.2 
 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Product market performance and policy indicators 

Notes:       
1) The methodologies, including the assumptions, for this indicator are shown in detail at : 
http://www.doingbusiness.org/methodology.        
2) Average of the answer to question Q7B_a. '[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?'. Answers were scored as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or if the outcome is not known.       
3) Percentage population aged 15-64 having completed tertiary education.       
4) Percentage population aged 20-24 having attained at least upper secondary education.       
5) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail at :  http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
6) Aggregate OECD indicators of regulation in energy, transport and communications.       

Sources: Sources:       
European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for the 
product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans).     

50 

Performance indicators201020112012201320142015Labour productivity (real, per person employed, year-on-year % change)Labour productivity in industry9.61-2.11-8.024.692.68-1.26Labour productivity in construction5.73-1.22-4.340.38-2.210.54Labour productivity in market services3.183.991.20-1.93-0.380.84Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in industry-9.534.6511.11-2.85-0.683.59ULC in construction-5.324.758.122.982.331.26ULC in market services-1.021.312.124.580.910.34Business environment201020112012201320142015Time needed to enforce contracts1 (days)375.0375.0375.0375.0375.0375.0Time needed to start a business1 (days)14.014.014.014.014.014.0Outcome of applications by SMEs for bank loans20.310.060.230.410.570.23Research and innovation201020112012201320142015R&D intensity3.733.643.423.293.172.90Total public expenditure on education as % of GDP, for all levels of education combined6.856.767.127.16nanaNumber of science & technology people employed as % of total employment494950515252Population having completed tertiary education3323333343536Young people with upper secondary education4848586868687Trade balance of high technology products as % of GDP-0.33-0.74-0.87-1.02-0.98-1.22Product and service markets and competition200320082013OECD product market regulation (PMR)5, overallna1.341.29OECD PMR5, retail2.862.892.86OECD PMR5, professional services0.610.710.62OECD PMR5, network industries62.722.612.47 
 
 
 
 
 
 
C. Standard Tables 

Table C.5:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2005 prices)        
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)        
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)        
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)        
          Waste intensity: waste (in kg) divided by GDP (in EUR)        
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP          
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP        
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change)        
Real unit energy cost: real energy costs as a percentage of total value added for the economy        
Environmental taxes over labour taxes and GDP: from European Commission's database, ‘Taxation trends in the European 
Union’        
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR)         
Real unit energy costs for manufacturing industry excluding refining : real costs as a percentage of value added for  
manufacturing sectors        
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP        
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT.        
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste        
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP        
Proportion of GHG emissions covered by EU Emissions Trading System (ETS) (excluding aviation): based on greenhouse gas 
emissions        
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency.        
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2005 EUR)        
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport sector        
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels        
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk.        
Diversification of the energy mix: Herfindahl index over natural gas, total petrol products, nuclear heat, renewable energies 
and solid fuels        
* European Commission and European Environment Agency        

Source: Source:   
European Commission (Eurostat) unless indicated otherwise  

51 

Green growth performance201020112012201320142015MacroeconomicEnergy intensity kgoe / €0.200.190.180.180.190.18Carbon intensity kg / €0.440.390.360.370.35-Resource intensity (reciprocal of resource productivity)kg / €1.081.061.031.070.990.98Waste intensity kg / €0.61-0.53-0.56-Energy balance of trade % GDP-2.8-3.8-2.6-2.5-2.4-Weighting of energy in HICP%7.577.528.378.127.847.63Difference between energy price change and inflation %8.617.2-3.2-1.6-2.6-2.3Real unit of energy cost% of value added14.016.917.216.715.8-Ratio of environmental taxes to labour taxesratio0.130.140.130.130.13-Environmental taxes% GDP2.73.03.02.92.9-Sectoral Industry energy intensity kgoe / € 0.290.290.300.300.300.31Real unit energy cost for manufacturing industry excl. refining% of value added18.319.822.721.821.8-Share of energy-intensive industries in the economy% GDP11.4011.6311.5211.6611.5011.01Electricity prices for medium-sized industrial users€ / kWh0.070.080.070.070.070.07Gas prices for medium-sized industrial users€ / kWh0.030.040.050.050.050.04Public R&D for energy % GDP0.110.100.080.080.080.08Public R&D for environmental protection% GDP0.020.020.020.010.010.01Municipal waste recycling rate%32.834.833.332.532.540.6Share of GHG emissions covered by ETS*%55.552.748.549.948.845.8Transport energy intensitykgoe / €0.640.610.590.590.600.62Transport carbon intensitykg / €1.671.551.481.481.40-Security of energy supplyEnergy import dependency%47.852.846.348.648.946.8Aggregated supplier concentration indexHHI72.280.068.068.367.5-Diversification of energy mixHHI0.210.210.210.210.22- 
 
 
 
 
REFERENCES 

Ali-Yrkkö  J,  Rouvinen  P,  Sinko  P  and  Tuhkuri  J  (2016)  Finland  in  Global  Value  Chains.  Prime 
Minister’s Office publications 12/2016 

Andersen, Torben M. and Svarer, Michael, Business cycle contingent unemployment insurance, in Nordic 
Economic Policy Review, 1/2011 

Bergholm,  Tapio  &  Bieler,  Andreas  (2013)  Globalization  and  the  erosion  of  the  Nordic  model:  A 
Swedish–Finnish comparison  

Borg A, Vartiainen J (2015) Strategia Suomelle. Valtioneuvoston kanslian julkaisusarja 5/2015. 

Bouget D, Frazer H, Marlier E, Sabato S and Vanhercke B (2015): Social Investment in Europe: A study 
of national policies. Brussels: European Commission 

Calmfors, Lars, Wages and wage-bargaining institutions in the EMU – a survey of the issues, 2001 

Calmfors,  Lars  and  Driffill,  John  (1988)  Bargaining  Structure,  Corporatism  and  Macroeconomic 
Performance in Economic Policy  

City of Helsinki (2016). Preparatory education, 

Costa  P.,  Ribeiro  A.,  Van  der  Zee  F., Deschryvere  M.  (2016),  Framework  conditions  for  High  Growth 
Innovative Enterprises, European Commission, Luxembourg  

Danthine,  Jean-Pierre  and  Hunt,  Jennifer,  Wage  Bargaining  Structure,  Employment  and  Economic 
Integration, Economic Journal, 1994 

Economic  Policy  Council 
budjettiesityksestä.  

(2016)  Talouspolitiikan  arviointineuvoston 

lausunto  vuoden  2017 

ECB (2016), Survey on the Access to Finance of Enterprises, June 2016 

Elinkeinoelämän  Keskusliitto  (EK),  EK  selvitti:  Kiky  vei  paikallista  sopimista  eteenpäin  (2016) 
(http://ek.fi/ajankohtaista/tiedotteet/2016/06/07/ek-selvitti-kiky-vei-paikallista-sopimista-eteenpain/) 

Employment 
http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7859&furtherPubs=yes  

Developments 

Social 

Europe 

and 

in 

2015 

EUA (2016), Public Funding Observatory 2016 

European Commission (2014) Macroeconomic Imbalances Finland 2014. European Economy, Occasional 
papers 177. 

European Commission-EPC, 2016. Joint Report on Health Care and Long-Term Care Systems and Fiscal 
Sustainability. Volume 2 – Country documents. Brussels;  

European  Commission  (2016a),  Education  and  Training  Monitor  2016  —  Volume  2,  Finland, 
Publications Office of the European Union, Luxembourg. 

European Commission (2016b), Europe’s Digital Progress Report, 

European Commission (2016c), Country Report Finland 2016, 

52 

 
 
References 

European Commission (2017), Debt Sustainability Monitor 2016, Institutional Paper 047, January 2017 

European Commission, European Investment Bank, European Investment Fund (2016), The Investment 
Plan for Europe: state of play September 2016 

European Job Mobility Laboratory, 2011, Partnerships among Employment Services 

Eurostat (2015), Comparative price levels for food, beverages and tobacco 

FVCA  (2016)  Venture  Capital  and  Private  Equity  Industry  in  Finland  2015.  Finnish  Venture  Capital 
Association 

Hansson  P,  and  Lundberg  L  (1991)  Näringsstruktur,  strukturomvandling  och  produktivitet.  In 
Internationalisering och produktivitet. Expertrapport nr 8 till Produktivitetsdelegationen. 

Kajanoja L (2012) Suomen kilpailukyky ja sen mittaaminen. Euro ja talous 5/2012 Bank of Finland. 

Kangas,  Olli,  Ideasta  kokeiluun?  -  Esiselvitys  perustulokokeilun  toteuttamisvaihtoehdoista,  2016: 
(http://tietokayttoon.fi/julkaisu?pubid=10601)  

Kela, Tilastollinen vuosikirja, 2015 

Kiss,  A.  &  Vandeplas,  A.  (European  Commission)  Measuring  Skills  Mismatch  -  Analytical  Webnote, 
2015 http://ec.europa.eu/social/BlobServlet?docId=14974 

Kotamäki,  Mauri  &  Kärkkäinen,  Olli,  Työllisyys  kasvaa,  työnteko  vähenee?  Työnteon  kannustimet  ja 
suojaosareformin vaikutus, Finnish Labour Review 4/2014 

Kröger,  Mähönen,  Klemetti,  Nieminen,  Paikallinen  sopiminen  –  uhasta  mahdollisuudeksi,  in  Finnish 
Labour Review 2/2016 

Lehto  E 
http://www.labour.fi/ptblogi/2016/04/06/laskelmia-kilpailukykysopimuksen-vaikutuksista/ 

kilpailukykysopimuksen 

(2016)  Laskelmia 

vaikutuksista. 

PT-blogi 

6.4.2016. 

LVM (2016a), Ministry of Transport and Communications: press release 01.08.2016 

LVM (2016b), Ministry of Transport and Communications: press release 22.09.2016 

Melbourne Mercer Global Pension Index (2016). http://www.globalpensionindex.com/ 

of 

Finance 

Ministry 
http://valtioneuvosto.fi/documents/10623/1985149/Valtiovarainministeriön+arvio+työmarkkinajäjestöjen
+neuvottelutuloksen+vaikutuksista+29.2.2016/ 

kilpailukykysopimuksen 

vaikutuksista.  Memo. 

Pika-arvio 

(2016) 

Ministry  of  Economic  Affairs  and  Employment  2016a,  Employment  Bulletin,  September  2016: 
http://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/75581/TKAT_Syys_2016.pdf?sequence=1  

Ministry of Economic Affairs and Employment 2016b, Työllisyyspaketti -työryhmän esitykset, Ministry 
of Economic Affairs and Employment publications 33/2016 

Ministry  of  Economic  Affairs  and  Employment  2016c,  Työ-  ja  elinkeinoministeriön  lyhyen  aikavälin 
työmarkkinaennuste, syksy 2016 

53 

 
 
References 

Ministry of Education and Culture (2015), Tomorrow’s comprehensive school 

Ministry of Social Affairs and Health http://stm.fi/en/frontpage 

Määttänen  N  and  Ropponen  O,  Listaamattomien  osakeyhtiöiden  verotus,  voitonjako  ja  investoinnit. 
ETLA reports Nr 40 12/2014  

Närvi,  Johanna,  Äidit  kotona  ja  työssä  –  perhevapaavalinnat,  työtilanteet  ja  hoivaihanteet,  2014: 
http://www.julkari.fi/bitstream/handle/10024/116920/narvi.pdf?sequence=1  

Obstbaum,  Meri  and  Vanhala,  Juuso,  Paikallinen  Sopiminen  in  Kansantaloudellinen  aikakauskirja, 
2/2016 

OECD (2013), Programme for International Student Assessment (PISA) 2012 

OECD (2016a) Economic Surveys – Finland, January 2016; 

OECD (2016b), Back to Work: Finland: Improving the Re-employment Prospects of Displaced Workers, 
OECD Publishing, Paris 

OECD (2016c), Education at a Glance 2016. OECD Indicators 

OECD (2016d), Financing SMEs and entrepreneurs 2017: an OECD scoreboard 

OECD (2016e), The Walking Dead? Zombie Firms and Productivity Performance in OECD Countries 

OECD (2016f), R&D Tax Incentive Indicators, July 2016. 

OKM (2015), Ministry of Education and Culture: National action plan / Finland 

Pitkänen,  Sari  –  Mertala,  Sirpa  -  Ala-Kauhaluoma,  Mika,  TE-palveluissa  vahvistettava  kokeiluista 
kumppanuuksiin perustuvaa monikanavaisuutta ja yhteiskehittämistä, 1/2016, in Finnish Labour Review, 
http://tem.fi/tyopoliittinen-aikakauskirja 

Prime  Minister's  Office  (2016),  Hallituksen  esitys  Eduskunnan  vuoden  2016  toiseksi  lisätalousarvioksi, 
2016, https://www.eduskunta.fi/FI/vaski/HallituksenEsitys/Documents/HE_88+2016.pdf.  

Prime  Minister’s  Office  (2016a),  Action  plan  for  the  implementation  of  the  key  project  and  reforms 
defined in the Strategic Government Programme 

Prime Minister’s Office (2016b), Growth drivers and bottlenecks of start-up companies, Publications of 
the Government’s analysis, assessment and research activities 30/2016 

Prime Minister’s Office (2017) Business taxation, investments and productivity 

Richardson, 
(http://www.ifs.org.uk/docs/OECD%20countries_Richardson.pdf) 

Childcare 

Linda, 

Costs 

of 

Across 

OECD 

Countries, 

2012 

SOSTE, Lausunto Eduskunnan työelämä- ja tasa-arvovaliokunnassa, 11.11.2016 

The 
http://ec.europa.eu/social/BlobServlet?docId=16330&langId=en  

Situation 

Monitor 

(SSM), 

Social 

Making 

Work 

Pay", 

2016, 

54 

 
 
References 

TEM (2016), Ministry of Economic Affairs and Employment: press releases 

Thévenon,  O.  and  Solaz,  A.  (2013),  “Labour  Market  Effects  of  Parental  Leave  Policies  in  OECD 
Countries”, OECD Social, Employment and Migration Working Papers, No. 141, OECD Publishing 

Uusitalo  R  (1999)  Miten  kävi  hallitun  rakennemuutoksen?  VATT-Discussion  Papers  206.  Government 
Institute for Economic Research.  

Valtioneuvoston 
http://vnk.fi/documents/10616/2009122/5_Tuloverotuksen+vaikutus+ty%C3%B6n+tarjontaan.pdf/1d853
9b5-f354-4f31-93cf-9a70a6b32c37?version=1.0 

Tuloverotuksen 

tarjontaan, 

vaikutus 

kanslia, 

työn 

2015, 

Viitamäki, Heikki, Työnteon kannustimet, mitä jää käteen?, VATT, 2015 

VM (2016a), Ministry of Finance: Economic survey, Autumn 2016 

VM (2016b), Ministry of Finance: Budget review 2017 

Yrittäjät  (2016a),  Pk-yritysbarometri  2/2016  (Federation  of  Finnish  Enterprises,  Finnvera,  Ministry  of 
Economic Affairs and Employment) 

Yrittäjät (2016b), Syksyn 2016 Pk-yritysbarometri (Federation of Finnish Enterprises, Finnvera, Ministry 
of Economic Affairs and Employment) 

55