What are the challenges and outlook for Finland’s public finances?
On 10 February 2017, the Ministry of Finance published a report on the situation and outlook for Finland’s public finances. The report examines what the situation of public finances and the labour market looks like in relation to targets set by the Government.
The Government has set the following targets: halting growth of public debt, increasing the employment rate to 72% and making the decisions necessary to bridge the sustainability gap.
Analyses by the Ministry of Finance show that the Government is falling short of some of its key targets. Although there has been some favourable economic news in the past few months, the problems in the public sector and the labour market have not disappeared.
According to the report, the Government can achieve its key targets by acting purposefully in accordance with the Government Programme to strengthen public finances and raise the employment rate.
Focus on improving employment and restructuring public finances
As matters stand, the employment and growth measures already implemented are not sufficient to strengthen public finances by the EUR 2 billion outlined in the Government Programme. According to the report, achieving the employment target is unlikely without effective policy measures to boost labour demand and supply.
Half of the EUR 1 billion saving sought by cutting public finance duties and obligations has still not been achieved. Additional measures to ensure the delivery of the saving are therefore required.
Preparation of the health and social services reform is already well under way, but significant details remain to be decided. To cover transition costs, greater savings are required so that, on a net level, the EUR 3 billion savings target is achieved.
Central government finances in particular need strengthening
Central government is falling significantly short of the deficit target set for it by the Government. According to the report, measures to strengthen public finances should be directed primarily at central government finances.
This would also support compliance with the obligations of the EU’s Stability and Growth Pact.
Mikko Spolander, Director General, tel. +358 2955 30006, mikko.spolander(at)vm.fi