Debt will not be halted even when the economy begins to grow again. Moreover, the sustainability gap is now larger. A post-crisis change of direction in the public finances is required.

Finland’s public finances have gathered strength; the general government deficit has shrunk and the ratio of public debt to GDP has begun to contract. Yet determined efforts are still required to address the challenges to fiscal sustainability in the long term.

Population ageing will push up public expenditure at the same time as the contraction in the working-age population reins in economic growth. The sustainability will remain around 3% of GDP.

A halt in further growth of the debt ratio looks possible in the medium term. However, the sustainability of the public finances remains unresolved.

Resolving the protracted problems in the Finnish economy requires action in three areas. It is necessary to improve cost-competitiveness, continue structural reforms and end growth in the public debt.