Post-Nokia stagnation and lost competitiveness

After contributing roughly a quarter of Finland's growth at its peak, Nokia's rapid loss of market share in mobile phones and its 2013-2014 divestment to Microsoft removed one of the economy's central pillars just as Finland's paper and forestry exports were also structurally declining. Bank of Finland governor Erkki Liikanen described the resulting period as 'major structural change' rather than an ordinary cyclical downturn, noting that Finland had lost competitiveness since 2007, with unit labour costs rising more than 10 percent above the level of its main trading competitors, while the information and communications technology sector's share of the economy shrank sharply. The consequence was three consecutive years of economic contraction heading into 2015, with the Bank of Finland forecasting growth of just 0.5 percent that year and no sign of a quick rebound. Because Finland shares a currency with the rest of the euro area, it could not devalue its way back to competitiveness as it had in past downturns, leaving a slow internal adjustment through wages and costs, compounded by a parallel collapse in exports to Russia, as the only available channel for recovery.