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INTOSAI Working Group on Public Debt
Mexico City 14.-15.6.2010
Hannu Rajamäki, NAOF
31.5.2010
Economic Survey of Finland 2010, Summary
The worldwide recession hit Finland harder than most other
OECD countries. (2009 GNP: - 7,8 %; EU - 4%, USA - 2,6%)
Export volumes fell by almost a third from their 2008 peak
The well supervised and prudent financial sector has weathered
the crisis well
A significant fiscal stimulus and monetary loosening by the
ECB have cushioned the downturn
Recovery has been slow
- potentially dampened by deteriorating competitiveness due to an
appreciating exchange rate, large industry–level bargained wage
increases and slowing productivity growth
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Economic Survey of Finland 2010, Summary
The crisis has worsened the fiscal outlook, calling for a clear
consolidation strategy supported by a stronger fiscal framework.
The decline in potential output due to the crisis and the permanent nature of
many of the stimulus measures have further undermined long–term fiscal
sustainability that was already set to weaken by rapid ageing.
The fiscal framework, including a central government expenditure
ceiling and multiple targets, was severely tested in the recession and has
been partially suspended.
According to OECD and also to NAOF to restore sustainability Finland
should show the same resolve as after the 1990s crisis:
- a fiscal consolidation plan should be announced as soon as possible
- include measures to increase the duration of working lives,
- contain expenditures and raise taxes on consumption and property.
- fast–growing municipal expenditures need to be restrained
- the municipalities’ declining productivity can be enhanced by more
ambitious mergers and structural reforms among local governments
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Finland, Public sector’s EMU-deficit (-) and -debt,
% of GNP
4
Central Government Debt, Finland
Source: State Treasury of Finland
5
Central Government Debt, Finland
1978-2010 (milj.€)
%/GDP
Eur
Foreigncurrency
Total
2010
43,9*
68 768
-
68 768
2009
37,2
64 281
-
64 281
2008
29,4
54 382
-
54 382
2007
31,2
56 068
-
56 068
2006
35,3
58 859
45
58 904
2005
38,2
60 000
44
60 044
2004
41,9
63 745
43
63 788
2003
43,4
62 079
1 241
63 320
Year
Source: State Treasury of Finland
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Finland’s Interest Rate Spreads to Germany
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Interest Rate Sensitivity
Year
Source: State Treasury of Finland
8