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IMF Urges Finland to Add Jobs, Cut Spending to Stem Debt

IMF Urges Finland to Boost Jobs, Cut Spending to Stem Debt Rise

Finland needs more steps to boost jobs and cut spending to stop public debt growth in the medium term, the IMF said, after concluding a health check on the Nordic country’s economy.

The government’s planned employment measures are “unlikely to produce sufficient fiscal gains” to halt debt growth mid-decade given its pre-pandemic decision to expand the welfare state has pushed up permanent spending, the International Monetary Fund said on Friday. Public debt is expected to exceed 70% by end-2021 and the IMF forecasts a potential growth rate for the economy of just 1 1/4% in the medium term.

More needs to be done to “progressively close routes to early retirement for older workers” and target benefits better, encouraging people to take on jobs. Some tax increases could be made, but given the high level of taxation “the adjustment effort should focus on reducing expenditure,” the IMF said.

“Once the recovery is firmly on track, staff recommend a moderately faster consolidation to bring public debt on a declining path over the medium term to rebuild buffers and prepare for the increases in aging-related spending,” according to the statement.

“The government is well aware of the threat of strong economic growth being short-lived,” Finance Minister Annika Saarikko said in a statement. “The points made by the IMF are very understandable, and we must act on them in order to stabilize the debt-to-GDP ratio.” 

©2021 Bloomberg L.P.