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- GDP (PPP):
- $197.5 billion
- -0.2% growth
- -0.6% 5-year compound annual growth
- $36,395 per capita
- Inflation (CPI):
- FDI Inflow:
Finland’s economic freedom score is 73.4, making its economy the 19th freest in the 2014 Index. Its score is 0.6 point worse than last year, due primarily to deteriorations in fiscal freedom, business freedom, and the management of government spending. Finland is ranked 9th out of 43 countries in the Europe region, and its overall score is well above the world average.
Over the 20-year history of the Index, Finland has advanced its economic freedom score by 9.7 points, the sixth best performance among advanced economies. Improved scores for seven of the 10 economic freedoms, led by notable enhancements in the area of market openness measured through trade freedom, investment freedom, and financial freedom, have enabled Finland to advance to the ranks of the “mostly free.”
As reflected in the steady rise of its economic freedom over the past two decades, Finland’s strong competitiveness is built on flexibility and openness. The economy continues to be among the world leaders in several of the 10 economic freedoms including business freedom, property rights, and freedom from corruption. The sound regulatory environment encourages entrepreneurial activity and innovation. Commercial operations are handled with transparency and speed, and corruption is perceived as almost nonexistent.
Finland is sparsely populated. About one-fourth of its land mass is above the Arctic Circle. In April 2011, the center-right National Coalition Party formed a six-party governing coalition with Jyrki Katainen as prime minister. In the February 2012 presidential elections, the National Coalition Party’s Sauli Niinistö won in the second round of voting, ending 30 years of Social Democrat presidencies. Finland became a member of NATO’s Partnership for Peace in 1994 and sits on the Euro–Atlantic Council, but it has not pursued full NATO membership because of its neutral military status and lack of popular support. It joined the European Union in 1995 and adopted the euro as its currency in 1999. Although economic growth remains sluggish, Finland’s economy is modern and competitive, with vibrant information and communications-technology sectors.
Corruption is not a significant problem in Finland, which consistently ranks among the top performers in Transparency International’s Corruption Perceptions Index. Secured interests in property are recognized and enforced. Contractual agreements are strictly honored. The quality of the judiciary is generally high. Finland adheres to numerous international agreements that aim to protect intellectual property.
The top individual income tax rate has been increased to 31.8 percent, and the top corporate tax rate remains at 24.5 percent. Other taxes include a value-added tax (VAT) and a flat 28 percent tax on capital income. The overall tax burden is 43.4 percent of GDP. Government expenditures are 55 percent of the domestic economy. The government is working to stop debt growth by 2015. Public debt comprises 53 percent of GDP.
The efficient and transparent business framework continues to support the private sector. Incorporating a business costs about 1 percent of the level of average annual income and takes three procedures. The non-salary cost of employing a worker is high, and severance payments are not overly burdensome. Monetary stability has been well maintained, although the government subsidizes numerous biogas, wind, and solar energy projects.
EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Investment in some sectors of the economy may be screened by the government. Nonetheless, overall investment regulations are transparent and efficient. The well-developed financial system is competitive and provides a wide range of services. Banking remains generally sound and well-capitalized.