Roundup: Sanctions against Russia a heavy blow to Finnish economy
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E-mail Xinhua, August 7, 2014
While voicing his support for the latest round of EU sanctions against Russia, Finnish Prime Minister Alexander Stubb admitted that it will exert a significant indirect impact on the Finnish economy.
He told a press conference in Espoo in southern Finland on Wednesday that the direct impact on the Finnish economy would be limited but the indirect affect in the long term could be quite significant.
The impact could potentially even lead to an economic crisis in Finland, Stubb stressed.
ECONOMIC DECLINE PREDICTED
As a close neighbor to the east, Russia is one of the most important trade partners of Finland. Russia's share of Finland's exports last year was 10 percent.
The Bank of Finland predicted that a decline of 3 percent in the Russian economy will mean 0.5 percent decline in Finland.
Stubb estimated the indirect impact of the sanctions could be up to billions of euros.
The deterioration of the Russian economy before sanctions were imposed had already exerted negative impact on the Finnish economy.
According to the Federation of Finnish Technology Industries, the technology industry's Russian exports between January and April were 18 percent less in comparison to the corresponding period of last year, with the largest drops being experienced in the metal and electronic industries.
Experts from the federation believed that the engineering and technology industries are among the most seriously affected sectors.
The lack of investment could be one of the major reasons, as sanctions targeting the Russian financial market will obstruct the Russian state-owned financial enterprises' access to finance.
Finnish companies' access to finance in Russia will also become problematic, explained Jorma Turunen, managing director of the federation.
The Finnish tourism industry will also be among the hardest-hit industries.
Pekka Sutela, professor of the University of Lappeenranta, estimated that the Russian ruble will be devalued due to the sanctions, thus curbing the flow of Russian visitors to Finland.
POSSIBLE COUNTER MEASURES
The Finnish economy will be affected more provided Russia adopts counter measures, Stubb warned. The Finnish government therefore has worked intensely towards curbing possible damage on Finland.
Media reports said the Russian authority has approved bans on agricultural imports from countries that have sanctioned Russia.
Heikki Juutinen, director of the Finnish Food and Drink Industries' Federation, said that the bans would present a huge challenge to the Finnish Food industry, as about 25 per cent of Finnish food exports go to Russia, and they are worth more than 400 million euros.
Finns are more worried that Russian officials are considering imposing flight restrictions on European airlines transiting over Siberia to Asia.
If the proposal is put to effect, the Finnish national carrier Finnair would be seriously affected, as Finnair’s flights to East Asian countries account for 40 percent of the airline’s passenger traffic turnover.
Stubb on Wednesday emphasized that if the sanctions disproportionately hit Finland, the government will seek for EU compensation to cover any significant loss. Endit
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