Finland's strong economic record has stalled, with the economy in recession for three of the last five years, largely because of a challenging external environment and structural weaknesses.
This has led to high unemployment, and put public finances under pressure. A more comprehensive structural reform agenda will be necessary to strengthen medium-term growth, while the pace and structure of fiscal consolidation should be designed to protect the fragile recovery. Completing and deploying the full macro-prudential toolkit will guard against domestic and regional financial stability risks. [Following sections abridged.]
Finland’s growth dilemma
1. The strong recovery from the global crisis was short-lived.
2. The recovery will be slow.
3. The recovery will also likely be fragile.
The right policies will make a difference
4. More ambitious structural reforms and well-calibrated fiscal consolidation would raise medium term growth.
5. Recognising the need for action, the authorities are pursuing reforms along a number of dimensions.
The case for ambitious structural reforms is strong
6. The obstacles to growth are well known.
7. The government reform programme is making progress, but the full agenda has yet to be implemented.
8. Bold and rapidly implemented measures will make a difference.
Fiscal policy can balance growth and sustainability
9. Cyclical and structural factors have weakened the public finances.
10. Credible fiscal adjustment over the medium-term will ensure sustainability and help protect the fragile recovery.
11. Structural reforms will help improve the public finances by raising growth over the medium-term.
Securing financial stability
12. The banking system has proven resilient throughout the double-dip recession.
13. A robust macro-prudential framework is crucial to containing underlying risks and ensuring stability.
14. The new instruments should be deployed in full and in line with the requirements of the integrated Nordic banking market.
Full statement
© International Monetary Fund
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