OECD: Finland must improve long-term sustainability of public finances

5 Mar 18

Finland should introduce new reforms to boost growth and stabilise its public finances, the OECD has said.  

The latest OECD Economic Survey of Finland found the Finnish economy had gained momentum after a long period of “sluggish performance”, mostly driven by exports and competitiveness, but further work was needed.

It identified a number of measures for public policy action, including reforms to ensure financial stability and long-term sustainability of public finances.

OECD deputy secretary-general Mari Kiviniemi said: “The Finnish economy has regained its growth momentum and Finland is once again showing its resilience.

“The strong recovery owes much to the efforts of workers, who have accepted sacrifices to restore price competitiveness, companies, which have restructured and innovated to meet evolving customer needs, and the government, which has accompanied these efforts through ambitious reforms.”

Changes to the tax and benefit system to support growth, as well as improving competitiveness and employment, while containing income inequality and preserving the quality of social services are included in the reforms.

The report also said a budget-neutral shift from labour taxes towards indirect, property and environmentally-related taxes could alleviate the burden on employment and boost growth.

Projected growth for Finland was around 2.5% in 2018, in the survey.

The economic recovery has also lifted government revenues, which has cut the budget deficit, but more should be done to put public financing “on a stronger footing”, the OECD said.

A combination of different working-age benefits, childcare costs and income taxation creates complexity, reduces work incentives and holds back employment in the country, which has a low employment rate by Nordic standards, the organisation said.                   

Kibiniemi added: “Good times are the moment to lay the foundation of future success, so this is no time for complacency.

“Unemployment remains too high, ageing-related costs are weighing on public finances, and globalisation and technology continue creating challenges as well as opportunities.”

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