Stability programme update for Finland 2009

Stability programme update for Finland 2009
04.02.2010 | pdf, 686 Kt

Summary

This Stability Programme update is based on the Government´s 26 March 2009 decision on the 2010-2013 spending limits for central government finances, the 2010 Budget approved by Parliament on 18 December 2009 and the short-term forecast published in the Ministry of Finance Economic Bulletin of December 2009.

The global economic crisis plunged Finland into an exceptionally deep recession at the end of 2008. The recession will leave a deep, long-lasting mark on the balance of general government finances and the debt ratio. As a result of the recession, the previously strong public finances have turned into deficit within a year.

The aggregate general government deficit will deepen in 2010 to 3½% of GDP. This will break the 3% limit for the public finances deficit of EU countries outlined in the Stability and Growth Pact.

In the next few years, a great challenge of economic policy is to implement a post-recession exit strategy in which measures supporting growth will be combined with general government adjustment measures. The recession has also exacerbated the challenges arising to public finances from population ageing. Provision must now be made for the spending pressures resulting from population ageing with much weaker general government finances than before.

The medium-term objective for Finland's general government finances is set at a structural surplus of 0.5% of GDP. Based on developments according to the baseline scenario, the medium-term objective will therefore not be achieved in the programme period without new, significant additional measures. The general government structural deficit is expected to be 1.3% of GDP in 2013.