Policy|Economic policy
The assessment covers the government’s fiscal policy stance, the long-term and short-term sustainability of public finances, private indebtedness, and the government’s employment and growth policies.
Economic policy the assessment board considers that the fiscal stance chosen for 2022 and the general government deficit are justified by the weaker economic outlook than previously projected. According to the council, government support measures boosted the economic recovery last year. However, the Board considers that the fiscal consolidation plan should be prepared without delay.
The Evaluation Council will publish its annual assessment of the government’s economic policy on Wednesday. HS will broadcast the announcement live at 10 a.m.
“The current crisis has shown that the ability to support the economy through fiscal policy is paramount. Fiscal room for maneuver must remain sufficient to counteract the negative effects of future crises,” the assessment board said in a statement.
However, according to the Council, the fiscal path chosen for degressive expenditure may not materialize. For example, new pandemic support measures could jeopardize the target if they are not compensated.
The Board is concerned that the general government structural deficit, which has existed for more than a decade, is expected to remain high even after the current crisis.
Free remedial action The debt ratio will continue to increase in the medium term. The Board estimates that stabilization measures of around 0.2-0.4% of GDP would be needed in the coming years.
“In the long run, the expenditure pressures created by the green transition and the increase in age-related expenditure will require a reassessment of public expenditure between investment and consumption,” the Board considers. “
According to the Council, the government should set out in detail adequate policy measures to mitigate the unfavorable outlook for public finances.
Higher employment targets play a crucial role in the government’s fiscal sustainability policy, and the Council therefore considers that all employment reforms should be comprehensively assessed from a fiscal perspective.
Further efforts are needed to reduce increased long-term unemployment, although the Review Council considers that the government has already taken important decisions to increase employment.
“Relevant ministries should further clarify their communication regarding the employment impact assessment of government actions. It should also be acknowledged that the employment impact of some reforms cannot be reliably assessed.”
Evaluation Board In the opinion of the cuts in education and research and development (R&D) subsidies in Finland during the 2010s, productivity growth is likely to have been hampered. It therefore considers that research and development should be given greater support. However, new subsidies should be offset by spending cuts or tax increases to curb costs.
The Council also considers the goal set by the parliamentary working group to introduce wider R&D tax support to be justified, as it states that the use of R&D tax incentives is low in Finland.
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