The sustainability gap estimate tells us by how much the general government fiscal balance needs to be permanently adjusted so that public debt does not grow out of control in the future. The updated estimate is 3.5% relative to GDP.
In the absence of supply bottlenecks, Finland’s GDP would grow 0.5 of a percentage point faster in 2021. We assume the supply-side disruptions will be smoothed out after 2022, and will not leave long-term scars on the economy.
The Finnish economy will grow 3.5% in 2021 and 2.6% in 2022. Growth is overshadowed by supply-side disruptions, high raw material prices and a deteriorating COVID situation. The rapid growth will be temporary, with the pace slowing to 1.3% by 2024.
The economy will grow approx. 1.2% per annum for the period 2021–2040, and thereafter growth will slow. Human capital threatens to decline from the 2040s. Developments can be influenced by investing in education/training and employment.
Although inflation will remain faster than in recent years longer than previously expected, many of the factors driving it are by their nature transitory and expected to largely cease to apply during the course of 2022. There is, nevertheless, considerable uncertainty. In Finland, we need reforms to strengthen the prospects for economic growth.
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