Kuoppamäki on Tuesday told According to YLE, achieving the goal with spending cuts could even be harmful to the national economy and added that there is almost no room for large tax increases.
“Six billion euros is a very good, but also an ambitious goal. It is very difficult to achieve that with just spending cuts. It would mean very large cuts during one election period,” he explained to the public broadcasting company. “It would slow down Finland’s economic growth in the near future.”
Due to the challenge of the task, Danske Bank predicts that public sector debt will continue to grow in the coming years – at a pace that will depend somewhat on the composition of the next government.
“We expect the debt ratio to start growing in 2024, unless economic growth accelerates more than expected or the new government prioritizes adjustment,” he said. latest economy Review by Danske Bank.
The Nordic financial group has refined its growth forecast for Finland and stated that the gross domestic product will shrink by 0.2 percent instead of 0.7 percent in 2023. The economy is expected to return to growth next year and grow by 0.9 percent. .
“With the largely avoided energy crisis, the economic outlook for Finland’s export market is better than feared. The Eurozone avoided recession, and China’s economy opened up after years of coronavirus restrictions. That’s why we have slightly raised the economic forecast for Finland,” he explained.
According to the forecast, the debt ratio will also decrease from 73.0 percent in 2022 to 72.1 percent in 2023, after which it will recover to 72.4 percent in 2024. The government’s debt this year is expected to be 10.4 billion euros, as its interest costs will rise to around two billion euros.
Kuoppamäki paid special attention to structural reforms.
“For example, if structural reforms could encourage people to find employment better and faster, they could have positive effects on Finland’s potential future growth,” he commented to YLE.
Public expenditures are predicted to increase with, among other things, investments in energy subsidies, national defense capability, and the unification of the salaries of social and healthcare professionals as part of the formation of welfare service provinces.
Finland’s debt burden still seems to have caused great concern among international investors, as yields on government bonds have remained relatively under control, partly due to the country’s good credit rating.
Danske Bank expects the credit rating to remain at the current, second-highest level.
“Credit rating agencies have taken a calm approach to indebtedness. However, they are still waiting for structural reforms to correct the deficit of sustainable development and measures to adjust the public finances, Kuoppamäki told YLE.
Aleksi Teivainen – HT
Source: The Nordic Page