Despite being fairly well run, Finland’s economy has performed relatively badly in recent years. While being in far better shape than Southern Europe, it has badly trailed for example Germany and Sweden.
Some people blame it on the euro, but that explanation doesn’t seem credible considering how many other euro area economies, including the aforementioned Germany, have been doing so good.
So why has it performed so badly? In two words: bad luck.
“Bad luck” can be defined as being disadvanteged by things one can’t control, and that is exactly what has happened to Finland.
First, the big drop in sales of traditional mobile phones and it’s replacement with so-called “smart phones”. For a long time, Nokia dominated the mobile phone market, and Finland earned a lot from it. At its peak about a decade ago, Nokia alone was more than 3% of Finland’s GDP.
Then came the IPhone, and “smart phones” from other companies like Samsung. While Nokia did introduce “smartphones” too, they were rejected by most consumers and Nokia’s mobile phone dominance collapsed. Now Nokia is only a few tenths of a percent of Finland’s economy, so this alone directly subtracted 3% from Finland’s economy, indirectly probably more.
A partly related technological trend, the increasing digitalization, has reduced demand for paper, and so hit another key Finnish industry, it’s paper industry. This has hurt Sweden too, but not as much as Finland. as that industry’s relative importance was lower in Sweden.
And finally, over capacity in the global steel industry has hurt another key Finnish industry, the steel industry.
Now the conflict over Ukraine and Crimea between the US and EU is threatening to disrupt Finnish-Russian trade ties. That would hurt Finland’s economy a lot more than the average EU economy because Finland is a lot more depedendant than others on Russian energy supplies (mainly natural gas) and also because a lot higher percentage of Finnish exports go to Russia.
If the conflict over Ukraine and Crimea would escalate and outright trade restrictions would be implemented, then Finland would again be stricken by unusual bad luck.