Press release 1.3.2006

Gross domestic product grew by 2.1 per cent last year

According to Statistics Finland's preliminary data, the volume of Finland's GDP grew by 2.1 per cent in 2005. Gross domestic product, or the combined value added of the goods and services produced, amounted to EUR 155 billion last year.

During the first quarter of the year output was up by 0.4 per cent on the previous quarter. In the second quarter of the year GDP fell by 1.3 per cent due to the industrial action in the wood and paper industry, but then grew again by 2.9 per cent in the third quarter. In the last quarter GDP increased by 0.9 per cent when compared with the previous quarter.

Volume changes of GDP 1996 - 2005, %

As in the previous year, growth in demand hinged on households' consumption and private investments last year. Investments, which had turned towards growth in 2004, continued to increase. The volume of exports grew by 7 per cent and that of imports by good 10 per cent. Private final consumption expenditure rose by 3.4 per cent last year. Purchases of new cars continued to increase moderately, but much more domestic appliances, entertainment electronics, furniture and other furnishings were bought than in the year before. Purchases of durable consumer goods went up by 8.5 per cent last year, whereas in the year before they increased by 7 per cent. Government consumption expenditure grew by 1.5 per cent.

Fixed investments increased by nearly 2 per cent. Total investments in machinery, equipment and transport equipment decreased by 5.5 per cent. Compared with the previous year, investments in residential buildings increased by 4 per cent, while construction of other buildings went up by 6 per cent. Government investments contracted by 6 per cent.

The volume of primary production went up by just short of 2 per cent from the previous year. In the processing industries, output declined by less than one per cent from the previous year. Due to the industrial action in early summer, output in the wood and paper industry was almost 10 per cent down on the year before. In the service industries, output grew by 3 per cent last year. Building construction increased by 5.4 per cent.

Profits of non-financial corporations declined slightly

The operating surplus of non-financial corporations went up by 1 per cent from the year before. The entrepreneurial income of non-financial corporations diminished by 4 per cent from its record level of the year before. Entrepreneurial income roughly corresponds to profit before taxes and dividends. Non-financial corporations paid about the same amount of direct taxes as in the previous year.

By contrast, non-financial corporations paid 8 per cent less in dividends than in the year before, most likely due to revised treatment of dividends in taxation. The value of non-financial corporations' fixed investments in Finland went up by 5 per cent last year. Their net lending, i.e. their financial position, showed a surplus of good EUR 5 billion, which was good EUR 1 billion lower than in the year before.

Households' real income barely grew

In 2005, the disposable income of households increased by 1.6 per cent in nominal terms and by only 0.4 per cent in real terms. Gross earnings were increased most by growth in wages and salaries bill, by 4.6 per cent. Entrepreneurial income remained on level with the year before. There were several reasons for the moderate growth in total income. Paid direct taxes grew by 5 per cent, partly because dividends also became subject to tax. At the same time the dividend income of households fell by 15 per cent.

Final consumption expenditure of households grew by five per cent in nominal terms. The savings rate, that is, the proportion of savings relative to disposable income became negative and was -0.4 per cent, having been +2.8 per cent in the year before. Households' indebtedness rate increased further.

General government surplus EUR 4 billion

The financial position of central government showed a surplus of EUR 1 billion last year. The State's tax revenues grew by 3.4 per cent, value-added tax by 5 per cent. Income transfers paid to local government grew by nearly 7 per cent.

The financial position of local government showed a deficit of good EUR 1 billion, slightly more than central government was in surplus. The financial position was now in deficit from the fifth year. Local government's tax revenue increased by 4 per cent.

In total, general government EMU surplus was 2.6 per cent of GDP in 2005. The EMU debt amounted to 41.1 per cent of GDP.

The proportion of public expenditure to GDP was on level with the previous year, 50.7 per cent. The tax ratio, or the proportion of taxes and compulsory social security contributions to GDP, went up last year to 44.5 per cent, having been 44.3 per cent in the previous year.

Source:
National Accounts, Preliminary data, Year 2005 and 4th quarter. Statistics Finland
General government deficit and gross debt according to EMU criteria. Statistics Finland

Inquiries:
National Accounts: Mr Tuomas Rothovius +358 9 1734 3360, Mr Olli Savela +358 9 1734 3316
General government deficit and debt: Ms Paula Koistinen-Jokiniemi +358 9 1734 3362, skt.95@stat.fi

Director in charge: Mr Ari Tyrkkö

Statistical releases related to the press release:
Annual national accounts
Quarterly national accounts
General government deficit and gross debt according to EMU criteria

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