Weaker euro benefits Finnish exports, as big trade deficit is announced for 2011

”Very good news going forward for the forest industry”, says Pasi Holm of Pellervo Economic Research

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The weakening of the euro will significantly improve the competitiveness of Finland’s export industry, says Pasi Holm, Managing Director of the Pellervo Economic Research (PTT).
      ”It is very good news for the Finnish forest industry as well as for other industries, particularly for those competing with Sweden”, Holm notes.
      Over the past few months, the euro has weakened considerably for example against the US dollar, the British pound, the Swedish krona, and the Russian rouble.
     
At the beginning of September, the euro was worth more than 1.4 US dollars and almost 9.1 Swedish kronor. At present one euro buys 1.3 US dollars and 8.8 kronor.
      ”PTT expects the decline in the euro to continue against the dollar”, Holm adds. This year, the euro will be worth 1.2 US dollars on average”, PTT predicts.
      Moreover, the competitiveness of Finnish export companies is anticipated to improve even in the eurozone.
      The euro-denominated prices of products imported into Germany from for instance Japan and the United States will increase unless the companies exporting from those countries reduce their prices.
      All cars, fruits, clothes, and shoes imported from outside the eurozone will become more expensive for consumers, Holm notes. In addition, the prices of raw materials and components imported from outside the eurozone and used for many European products will also go up.
      Furthermore, Finnish travellers’ stays for example in the United States will cost more in euros.
     
”Certainly our export companies on average will benefit from the weakening of the euro”, says Penna Urrila, head economist at the Confederation of Finnish Industry (EK).
      ”However, we also have companies on which the effect will be just the opposite. Many listed companies hope that the euro would be as strong as possible”, Urrila notes.
      ”In the forest industry, the weak currency is naturally beneficial for exports, as their raw materials are domestic. However, many other industries use imported raw materials and components”, Urrila argues.
     
There is undoubtedly room for improvement on the export front: Finland's foreign trade figures for 2011, released by the National Board of Customs on Tuesday, indicate a record deficit, amounting to nearly EUR 3.6 billion.
      The last occasion on which deficits were reported with real values in this region was back in the oil crisis years of 1974 and 1975.
      As recently as in 2010, the trade balance was in surplus to the tune of around EUR 539 million.
      In 2011, the value of exports stood at 56.6 billion euros, i.e. 8% up on figures for 2010.
      Imports increased by 16%, however, to reach nearly EUR 60.2 billion.
      The imports rose close to pre-recessionary levels, whereas the value of exports still remained clearly lower than in 2006–2008.


Previously in HS International Edition:
  EK: Economic outlook to weaken slightly, employment to remain moderate (4.11.2011)
  Brisk growth in industrial investments in Finland during 2011 (13.1.2012)
  Economic experts warn of hard times ahead (11.11.2011)

See also:
  Weaker euro brings relief to Finnish industry (12.4.2010)

Links:
  Pellervo Economic Research (PTT)
  Confederation of Finnish Industries (EK)
  National Board of Customs - Record deficit on trade balance

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