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IMF: Unlikely Finnish government can balance budget by 2023

The IMF urges Finland to reconsider environmentally harmful subsidies, which add up to 3.5 billion euros a year.

Alasdair Scott lehdistötilaisuudessa Helsingissä tiistaina.
IMF senior economist and mission head Alasdair Scott spoke to reporters in Helsinki on Tuesday. Image: Antti Aimo-Koivisto / Lehtikuva
Yle News

The International Monetary Fund (IMF) has expressed scepticism about the Finnish government's goal of attaining a balanced budget during its four-year legislative term.

"The government plans to make the budget balance by 2023, in large part by boosting employment. But our view of likely growth and employment indicates the government would still have to borrow about one percent of GDP in 2023," the IMF said in its report on the Finnish economy.

Prime Minister Antti Rinne's centre-left cabinet, which took office in June, aims to balance the budget by 2023, despite agreeing on a 2020 budget deficit of two billion euros earlier this autumn. To that end, it intends to create 60,000 new jobs, raising the employment rate to 75 percent from the current 72.8 percent.

"Look at leave and home-care benefits"

"Keep your eye on fiscal sustainability. There's a probability, more than likely, that the budget will not be in balance in 2023," IMF senior economist and mission head Alasdair Scott said on a visit to Helsinki on Tuesday.

The IMF predicts that the Finnish economy will grow by 1.25 percent this year, rising to 1.5 percent in 2020. Last year it expanded by 1.7 percent.

"To boost employment, the government could look at leave and home-care benefits, which generate incentives for women to stay at home, and tax and benefit schedules that mean that some face a financial penalty to work, rather than stay unemployed or out of the workforce," the IMF suggested.

Environmentally harmful subsidies

The IMF report points out that various kinds of environmentally harmful subsidies, such as those for peat production, add up to 3.5 billion euros a year. Scott urged reconsideration of these, especially since the cabinet has promised that the country will be carbon-neutral by 2035.

In a statement, Minister of Finance Mika Lintilä conceded that the targets in the government agenda will be challenging to attain.

"The Government Programme is demanding. It is clear that the cornerstones are a fiscal balance, a restructuring of health and social services and raising of the employment rate. These will not be achieved automatically, but require determined action," he said.

The IMF also applauded the government's recommendation that banks limit the ratio of household debt to income. The Bank of Finland has long expressed concerned about household debt and the fact that housing company loans are making up a growing share of the housing loan market.

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