Aktia Bank says importance of Nokia cluster for Finnish growth is decreasing
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Timo Tyrväinen, the head economist at Aktia Bank, says that forecasting economic growth for Finland in the coming years is being made more difficult by the vacillations in the electronics industry cluster led by Nokia.
As he introduced the bank's fresh economic survey on Tuesday, Tyrväinen said that whether or not the impact of the Nokia cluster is positive or negative for GDP this year and next will depend on both Nokia's global sales, and on how its production is distributed among factories operating in different countries, and the success of the company's mobile network production.
According to Aktia's findings, the impact of Nokia and the companies linked with it is slightly negative, which means that it has tends to reduce growth in GDP.
One of the reasons for this is the so-called "Perlos phenomenon" - the transfer of production from Finland to other countries.
With each successive year, the proportion of Finnish production in Nokia's global sales has been decreasing. Tyrväinen expects the development to continue unchanged, which will also cut back on Finland's total exports, as that the sector continues to be responsible for a significant percentage of Finnish exports.
The role of the "Nokia sector" as a motor of growth was crucial for Finland in 1995-2000, says Tyrväinen. It accounted for an additional growth of 5-6 per cent in Finnish GDP. At the same time, Tyrväinen notes that the proportion of exports in Finnish GDP rose from 20 per cent in the 1990s to nearly 50 per cent in 2000.
When growth in world trade collapsed in 2000, exports of electronics was cut in half in a year, reducing the growth rate of GDP by 2.5 percentage points.
Since then, Tyrväinen says that electronics production has gone up and down like a yo-yo, causing confusion in cyclical analysis and in political debate.
A major improvement was not seen until December 2003, when the Nokia cluster grew by 30 per cent, until a new sudden stop occurred.
From the beginning of 2005 the impact of the sector was positive, but this year again, the direction is down.
Tyrväinen is worried about the rapid decline in the volume of exports late last year.
Exports to Russia experienced problems during 2006. The growth rate in exports went down to ten per cent, while imports continued to grow at a rate of nearly 30 per cent.
Tyrväinen believes that growth in the St. Petersburg and Moscow areas will continue at a rate of 20-30 per cent. He sees maintaining, and possibly even increasing market shares in these areas to be key issues for Finnish economic growth in the coming years.
Aktia predicts that growth in GDP will be 2.7 per cent this year, and just 2.5 per cent in 2008. According to advance information, last year's growth was 5.5 per cent, with the pace slowing down toward the end of the year.
Development in Europe was seen by Tyrväinen as unexpectedly positive. The budget deficits of Germany and France went down to less than three per cent of GDP. Aktia predicts that this will strengthen expectations that the European Central Bank will raise interest rates again this spring.
Helsingin Sanomat
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| 17.1.2007 - TODAY |
 Aktia Bank says importance of Nokia cluster for Finnish growth is decreasing |
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