Economic Crisis and the Global Forest Sector

Nilsson, S. (2009). Economic Crisis and the Global Forest Sector. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-09-012

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Abstract

The paper discusses the nature and development of the current economic crisis and some of the possible effects and impacts on the forest sector. We have experienced a tremendous economic growth during the last 20 years. This growth was driven mainly by increased credits, leverage, and deregulation. A whole chain of factors and developments took place during this period of some 20 years. The financial/economic crisis is a result of an entire string of interacting factors. My argument is that the crisis is an overall system failure. How can it happen in the era of ICT and a knowledge-based economy? Many players of the system failed to take action. A system failure cannot be repaired by simple measures such as economic stimulus programs to banks and the automobile industry. There is a high risk that the enormous amounts channeled to one-sided stimulus programs will generate new crises further down the road. In spite of today's "green shoots," "glimmers of hope," and "early signs of stability" in the economy I think there is a long way to go until stabilization of the economy is reached. The recovery will be anemic and fragile and will take time and we may very well have a second wave crisis before the recovery.

The crisis impacts the forest sector through decreased demand and prices and changed exchange rates with restructuring as a result. The forest sector has two crises in one. Before the economic crisis there was declining demand on certain forest products, increased competition by ICT, overcapacity, low profitability, wood supply problems, and competition on raw material with the energy sector. The ability of the sector to return to strong growth when the recovery comes is doubtful. The problems with the first crisis are still there. Thus, more change must happen (restructuring). I think there is a consensus in the sector that the conventional forest industry products are no longer sufficient from an economic point of view. Something more is needed. But nobody has a clear idea of what this "more" encompasses. The industry and governments have to take a bold step in creating huge programs investigating what new exciting value added commercial products can be produced from wood within a restructured forest industry.

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