General Economic Development in Finland
In 1995 Finland's GDP growth continued on the same
4.5 percent level as in 1994. Industrial production increased
by almost 10 percent encouraged by the good export demand
in the metal and electronics sectors. The entire exports grew
by 8 percent in volume. The growth of exports, however, weakened
markedly towards the end of the year, as the economic situation
worsened rapidly in Finland's main markets.
The private investment had also a clear positive
influence on the economic growth. However, construction of residential
buildings continued to decline, and thus weakened sawn timber
Unemployment rate was still high, on average 17.2 percent,
in spite of brisk economic growth. Inflation remained low, year-on-year
rise in the consumer price index was only 1 percent, lowest
of the EU countries. Current account showed a surplus of over
23 billion FIM, i.e., 4.2 percent of GDP.
The general slowdown of economic growth in the main
European countries at the end of 1995 was also seen in Finland.
This weak development continued during the first half of 1996
especially in the exports and investments reflecting also to GDP.
In the second half the economic growth accelerated
again as private consumption increased remarkably and exports
began to revive. Construction turned upwards and manufacturing
output started to show a stronger growth.
Although the growth remained slower in 1996 than
the previous year, with a 3.2 percent growth of GDP Finland
was clearly above the European average. In spite of a slight improvement,
the unemployment rate was still high, 16.3 percent. Current
account showed continuously strong surplus, 3.4 percent of
GDP and the inflation rate was still low, only 0.6 percent
rise in the consumer price index. The long-term interest rates
are well below the EMU-criteria.
Performance of Forest and Paper Industries in
During the first three quarters of 1995 the development
of the Finnish forest industry was favourable with a rapid growth
in the production and exports. In the last quarter, however, the
European paper market, especially in the woodfree grades, collapsed,
cutting the demand of pulp and paper drastically. As a result,
the paper industry production in Finland decreased by 12 percent
in the fourth quarter of 1995 compared to the same period of the
previous year. Thus, in spite of a good start, in 1995 the paper
and paperboard production remained on the same level as in 1994,
i.e., 10.9 million tons. Pulp production increased only by
1 percent up to 10 million tons.
The production of sawn timber was cut by 3 percent
to 9.4 million m3 due to the low level of domestic
construction. However, the production of wood panels peaked, driven
by favourable export demand.
As a whole, in 1995 the forest industry production
increased by only 2 percent. The average operating rate of
the industry was 92 percent.
The volume of the Finnish forest industry exports
decreased by 1 percent on average, and showed therefore a
slightly weaker development than that of production. The export
tonnage of pulp, paper and paperboard altogether decreased by
3 percent while sawn timber and wood panels experienced a
slight increase in the exports.
The prices of sawn timber decreased from the beginning
of the year. The woodfree paper grades showed a similar trend
during the second half. In 1995 the average export prices were
some 13 percent higher than in 1994.
As a result the export revenue of the Finnish forest
industry increased by 12 percent to 59 billion FIM in
The total turnover of the Finnish forest industry
companies (with some 30 percent of their paper capacity outside
of Finland) rose to the record level of 95 billion FIM and
the net result of the companies doubled from 6 billion FIM
in 1994 to 12 billion FIM in 1995. The total investments
of the forest industry in Finland were 8.5 billion FIM.
In 1996 the situation worsened with the weak economic
development of the main European countries affecting almost all
branches of the industry. Weak demand led to production curtailments
of 7-8 weeks, which dropped the average operating rate to 85 percent.
On average, the Finnish forest industry production decreased by
almost 3 percent.
Paper and paperboard production decreased by 5 percent
to 10.4 million tons, which was 0.5 million tons less
than in 1995, the biggest drop since the recession of 1975. Respectively,
total pulp production dropped by 4 percent.
The sawn timber production decreased to 9.2 million
m3 (-2 percent) because of a recession in the
construction sector both domestically and in the export markets.
An exception was the plywood production which increased by 11 percent
partly because of the new capacity.
The total export volume decreased by 2.5 percent.
Paper exports decreased by 8 percent, and exports of sawn
timber by 5 percent. On the other hand, exports of wood panels,
pulp and paperboard increased.
In 1996 the price level for most products dropped.
On average, the export prices were 8 percent lower than in
the previous year. Pulp prices decreased by 35 percent, woodfree
papers by 20 percent and sawn timber by 10 percent.
The average prices of mechanical paper grades in 1996 still remained
slightly above those of 1995.
Because of the lower export volumes and lower prices,
the Finnish forest industry export revenue was cut by 10 percent
to 53 billion FIM in 1996. The profitability of the industry
also weakened remarkably. The investments, however, rose to 12 billion
FIM. During the year several projects came on stream, Metsä-Serla's
new 300 000 tons paper machine at Kirkniemi, UPM-Kymmene's
100 000 tons release paper machine and the 500 000 tons
pulp mill of Metsä-Rauma.
Finnish forest certification standards project is
well under way. A national board of timber certification system
was formed in April 1996, on the initiative of the government.
Its working committee is addressing organisational matters concerning
forest certification. In August 1996, a special working group
was formed in which the forest sector, environmental organisations,
and social organisations are cooperating to develop standards
for sustainable forestry in Finland. FSC's international principles
and the EMAS's Environmental Auditing scheme provide the foundation
for the work. The proposal is planned to be presented in April
The broad-based standards working group has progressed
swiftly and is well on schedule. The group is continuing its committed
efforts to create minimum requirements or standards, taking domestic
conditions into account.
The target of forest certification is to guide forest
management and utilisation towards sustainability, economically
and ecologically, observing social and cultural aspects, and thus
promote marketing of forest products. Finland's commitment to
international agreements, legislation on forestry and nature conservation,
and the environmental programme for forestry adopted in 1994 form
the basis of this project.
Voluntary commitment of each forest owner will most
obviously be included in the certification system. Regional or
farm levels and their combination have been studied as alternative
levels for certification. The regional basis will be more applicable
to the Finnish circumstances.
The participation of a forest owner in the system
should be made as easy as possible, regardless of his earlier
forest management practices. The new Finnish legislation on forestry
and nature conservation, which came into effect on 1 January
1997 offers a steady ground.
The forthcoming proposal of the working group is
intended to be applicable both to international certification
system of forest management (FSC) and environmental management
systems (ISO and EU/EMAS). Rather than being mutually exclusive,
they can be combined and thereby they can complement each other.