Cyclical|According to the forecast, the deficit ratio of the public finances will increase to 3.7 percent this year and the debt ratio to 81 percent.
Finland the economy is starting to recover from the recession, but the debt of the public finances is still growing, estimates the Ministry of Finance (MoF) in its economic overview published on Monday.
The recovery of the economy is accelerated especially by the growth of private consumption, because the increase in consumer prices, i.e. inflation, slows down and interest rates fall.
According to the new forecast, the economy will grow by 1.6 percent next year and 1.5 percent in 2026. According to the ministry, the government’s actions to strengthen the public finances will increase prices, reduce domestic demand and slow economic growth in 2025 and 2026.
Recovery because of this, the public finance deficit is slowly starting to shrink, but not yet this year. According to VM, recent information on taxation predicts lower tax revenues in the current year than previously estimated.
At the same time, especially in welfare areas and in municipal administration, the growth of expenditures has been faster than anticipated. Because of these reasons, the forecast for the public finances will be weaker than forecast in the spring.
The Ministry of Finance predicts that this year’s public finance deficit will be 3.7 percent in relation to gross domestic product. In the spring, it estimates the deficit ratio to be 3.5 percent. Next year, the deficit ratio will be 3.1 percent, according to the Ministry of Finance, and 2.6 percent in 2026.
The bigger ones due to the deficits, the debt of the Finnish public finances in relation to the gross domestic product will also increase to 81% this year, to 83% next year and to 84% in 2026.
“Growth is starting slowly, but the public finances are worrying. Although a lot depends on the turn of the economic cycle, it is also necessary to ensure that the decisions made and the local government’s own plans to curb the growth of expenditures are realized and strengthen the public economy to its full extent”, says the Director General of the National Economy Department of the Ministry of Finance Mikko Spolander in the bulletin.
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