All good things come to an end. It is a sad,
yet uncontested truth. I think that the Finnish tradable sector may have
already entered such a phase.
It
is no secret that one pillar of the Finnish
miracle was the phenomenal growth of the country’s
electronics/telecommunication equipment cluster. This was the sector
that led
the country’s re-industrialization (I’ve talked extensively about that in thepast). There is a classification of manufacturing sectors according to
their technological
content. You can see which sectors are classified in each segment here.
OECD
runs some data on that but they are not particularly up to date. So I
used
sectoral data for the manufacturing sector and constructed these
aggregates
myself according to the definitions by Eurostat. This is what the
following
chart shows for the Finnish case. It can be seen that post 2008 the high
tech segment, which includes electronics, halved in relative size.
 |
| source: Eurostat, own calculations |
On the surface everything appears to be just
fine, as GDP growth, compared to the mess that Euro Area currently is, is more
than satisfactory.
 |
| source: Eurostat |
Some cracks have started to appear though.
Export growth for Finland, post the 2009 global
trade collapse, has been lackluster. As far as growth of exports per
inhabitant, compared to the 2008 levels, are concerned, Finland is the worst
performer of the Euro Area 12 countries, lagging behind even Greece.
 |
| source: Eurostat, own calculations |
What’s more, the country recorded a trade deficit
in 2011. This had not happened for a long time, namely since the beginning of
the 90s.
 |
| source: Eurostat |
If one starts digging deeper, the cracks
mentioned earlier start to appear much larger.
A great chunk of Finland’s growth this past
decade was due to its stellar export performance.
 |
| source: Eurostat, own calculations |
The most important component of Finnish merchandise exports
is the machinery and transport equipment segment.
 |
| source: Eurostat |
And
Telecommunications Equipment accounts for a large part of the overall Machinery
and Transport Equipment exports.
 |
| source: Eurostat |
It seems that besides the collapse in
Telecommunications Equipment exports there has been a sizeable decline in other
segments too.
If we take a more detailed look at exports of
that particular niche we might be able to draw some conclusions.
During the 00’s telecommunications equipment
exports stopped growing altogether. After a decline till the mid-00’s they
rebounded. At the same time imports of telecommunications equipment spiked too.
This could mean that part of the production process was outsourced abroad or
delocalized. After the 2009 global trade collapse, imports as well as exports
essentially halved. I would be surprised if moving part of processes abroad is
not to be blamed for a large part of that.
 |
| source: Eurostat |
Unfortunately, Eurostat does not publish data
concerning Finland’s industrial production in the electronics sector but
overall production for the manufacturing sector is lagging all core countries
by a wide margin. In crises of the magnitude of the one we entered in 2008, the
first sectors to feel the heat are the ones that were struggling all along.
European manufacturing was one such sector.
 |
| source: Eurostat, own calculations |
It seems that the country’s tradable sector has
run into trouble.
There are further cracks in other parts of the
Finnish economy but I don’t want to get into that now. My intention was not to
produce a report on the overall health of the Finnish economy. The purpose of
this post was to highlight the slow undoing of the Finnish miracle and that in
this ever-changing world nothing is forever and nothing stays still. Of course
the Finns have managed to get over massively-sized shocks in the past and I
surely hope they do so this time round too (but this is a different world that
we live in now and an incredibly harsh environment)…
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