The 1998 economic crisis in Russia and Finland's foreign trade

Abstract

In August 1998 Russia experienced an economic crisis as the Central Bank of Russia floated the rouble and the government defaulted on its bonds (GKOs).By May 1999 the rouble had lost 70 per cent of its pre-crisis value and Russian citizens had lost 35 per cent of their purchasing power.Total output plum-meted again in 1998 by five per cent.The volume of Finnish exports to Russia declined by 11 per cent in 1998 compared to 1997.Positive developments in the first half of the year helped to offset huge losses after the August crisis.Finland's exports to Russia in March 1999 was FIM 750 million, which is 45 per cent lower than in March 1998.For all of 1998, Finland maintained its trade surplus with Russia, but since September, Finland's imports from Russia have exceeded exports. The 1998 Russian crisis will not have a large impact on the overall Finnish economy.The impact will be different and far less severe from that of the collapse of Soviet trade in 1991, because in 1998 exports to Russia accounted for only 6 per cent of total exports and for some 2 per cent of Finland's GDP.However, for some sectors of the Finnish economy, the Russian crisis has already had more serious consequences. Keywords:Finland, Russia, foreign trade