Finnish economy remains strong, invests in Estonia

  • 1999-02-18
  • Daniel Silva
RIGA - Finland received a good review of its economy from the European Union - and that is good news for Estonia.

"Finland is one of the largest investors in Estonia, and one of our greatest import and export partners," said Irke Pigil of the Estonian Trade and Investment Board. "If they are doing well, it can only help us."

According to a comprehensive analysis of the economic situation in Finland published by the European Commission at the end of January, Finland has been doing "quite well" since the end of the severe recession of the early '90s - and especially after joining the EU in 1995.

The report notes Estonia's northern neighbor has had an average yearly GDP growth rate of nearly 5 percent since 1994.

Praise was given for the reduction of the country's public deficit, mostly through expenditure cuts, from 8 percent of GDP in 1993 to its current surplus level. Not since 1990 has Finland recorded a surplus in its government accounts.

Other positive features of the Finnish economy include low inflation, appropriate wage trends and low interest rates.

But perhaps the best news contained in the report was the prediction that the good times will continue.

"These solid macroeconomic fundamentals suggest that Finland can continue to grow more quickly than its major trading partners, provided that the country continues to follow sound stability-oriented policies and makes further headway in economic reform," the authors of the report wrote in their conclusion. Financial analysts in Tallinn are optimistic the good times in Finland will spill down into Estonia.

"We see it already," said Urmas Oru of the Estonian Chamber of Commerce. "Finish companies are very active here, they invest very much in Estonia."

Approximately 10 percent of the 2,500 businesses that are part of the Estonian Chamber of Commerce, added Oru, are partly or entirely owned by Fins.

More than half of the direct foreign investment into Estonia comes from Sweden and Finland.

"In the first half of 1998 Finland was the top foreign investor, in the second half it was surpassed by Sweden but only because of huge Swedish investment into Uhispank," said Pigil.

Demand for Estonian goods in Finland, which has always been strong, seems to be on the rise. Since the onset of the Russian economic crisis last August, Finland has replaced Russia as the top destination for Estonian goods, according to recent figures from the Bank of Estonia.

In November and October of last year, the last months for which figures are available, 23 percent of Estonia's exports went to Finland. Russia, which had been Estonia's top customer in 1997, purchased only 10 percent of Estonia's goods during those months.

The study, released Jan. 28, was conducted by the Directorate-General for Economic and Financial Affairs as part of the European Commission's regular monitoring of the economic policies of EU member states.