IMF urges Finland to boost sustainability of public finances

Finland has been urged to boost the sustainability of its public finances in a new report published by the International Monetary Fund (IMF).

The IMF, in its annual assessment, also urged Finland to reduce its debt ratio in the medium-term to prepare for an ageing population, Xinhua news agency reported.

The Finnish economy recovered quickly from the Covid-19 pandemic, supported by government measures, the IMF said. However, the Ukraine crisis has weakened the country’s economic outlook, and increased pressure on public finances.

Economic activity is expected to stall in 2023, the IMF said. Further contraction in private demand due to inflation is expected, and this can be only partially offset by higher public spending.

In 2024, the country’s growth is projected to return to a subdued trend rate of around 1.25 per cent, reflecting adverse demographics and low productivity growth.

Therefore, IMF said that in 2023, Finland should tighten fiscal policy by better targeting support measures related to energy prices, in order to curb inflationary pressures.

Finland is three months away from a general election, with the Finnish political scene split along classic left-right lines on taxation and labour policy.

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