The Finnish economy.

I Foreign trade and the current account

Recovery of export markets further improves export prospects

Finland's main export markets have strengthened clearly in the course of the current year. Earlier, exports increased substantially thanks to improved competitiveness, but now exports are speeded up also by the recovery of the markets. In addition, exports to other areas, such as Eastern Europe, have grown rapidly. The strengthening of the markets has been reflected also in export prices, which especially in the forest industry have experienced a clear upturn. In the January-July period, the volume of exports increased by 15%. For the entire year, merchandise exports will expand by 13% and the exports of goods and services by 11%. Next year, export demand will expand further, and the volume of exports will increase by 8%.

In recent years, exports prices in Finnish markka have risen owing to the weakening of the markka, although prices in foreign currencies have fallen. Along with the recovery of export markets, also foreign-currency prices have increased, and export prices will increase in the next few years despite the strengthening of the markka. In January-July, the price of merchandise exports rose by an average of 1%, but the increase in price is gaining momentum. Next year, export prices are estimated to increase by 4%.

Although the economy of Finland's traditional export areas has recovered and exports there have grown, their share in Finnish exports fell further early in the year. The share of the EU and Efta in Finnish exports amounted to 62.8% in January-July. The powerful draw to Eastern Europe has continued, and its share in Finnish exports is beginning to reach the level that prevailed before the 1991 collapse. A difference with the situation then is that the share of Russia is today less than half that of Eastern Europe, the combined share of which amounted to 11.9% in January-July. Exports to Southeast Asia have been dispersed. Exports to Japan have doubled and exports to China have increased by nearly a half. On the other hand, exports to some countries have diminished to a fraction of what they were last year, which may be due to large individual deliveries. In the future, the main market areas will act as a motor for exports, but exports to Eastern Europe will continue to grow strongly.

In the early months of the years, the exports of the metal and engineering industries have continued to grow vigorously. Growth in the metal and engineering industries will continue in a stable fashion. The rise in raw material prices, speeded up by the recovery of the world economy, will improve prospects also for the basic metals industry. The export prospects of the pulp, paper and board industry improved clearly early in the year. Exports have strengthened and prices have started rising clearly. Export prospects for the next few years are good. The strong growth of the wood industry continued early in the year. Next year, capacity constraints will already threaten the expansion of exports and will take the form of price pressures.

Imports growing clearly