Public finances VTV urges to adhere to spending frameworks: “It is important that the framework system continues to be credible in the future”

In its annual fiscal policy surveillance report, VTV estimates that the government’s fiscal policy will revive the economy properly in the interest rate year 2020.

Public finances In its report published on Thursday, the National Audit Office (VTV) estimates that the government ‘s fiscal policy will revive the economy appropriately in the interest rate year 2020.

However, it will be important to adhere to spending frameworks in the future so that the level of spending does not change unforeseen, it says.

Expenditure frameworks set an annual ceiling of about 80% of government budget expenditure. The purpose of the system is to control the growth of government expenditure. However, the framework was abandoned in the spring of 2020 due to the interest rate crisis.

VTV estimates fiscal policy in the annual

in its fiscal policy report.

According to it, fiscal policy must now ensure that public finances are strengthened when normal times are restored.

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“The high level of borrowing in 2020 and 2021 has been achieved at virtually zero interest rates, which will support public finances in the coming years. However, there is a risk that interest expenses may increase in the future. For this reason, it is important to ensure that the goal contained in the Government’s Sustainability Roadmap to reverse the growth of the debt ratio is achieved, ”VTV writes in the introduction to the annual fiscal policy report.

In the report, VTV criticizes that the decisions to increase the spending framework in 2022 and 2023 have clearly violated the principles of the framework system.

“It is important that the framework continues to be a credible tool for long-term planning of government spending,” he said.

VTV The report also estimates that public finances are rising slightly faster than previously expected from the hole caused by the interest rate crisis.

The ratio of public debt to GDP has increased considerably in Finland during the interest rate pandemic. In comparison with the EU, growth has nevertheless been moderate.

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According to VTV ‘s estimates, stimulus measures to support the business cycle have been justified in 2021.

The fiscal policy planned for next year, on the other hand, is tighter than this year, which will level the playing field.

“According to our economic indicators, the economy has recovered almost as strongly this year as it collapsed last year. In comparison, this year’s fiscal policy is proving to be loose with current information, ”says VTV’s senior economist. Matthias Strifler in the bulletin.

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