NAOF submits fiscal policy evaluation report as separate report to Parliament

The National Audit Office of Finland (NAOF) has published a fiscal policy evaluation report that includes a preliminary assessment on the achievement of the Government’s goals and compliance with fiscal policy rules in 2017 and 2018, as well as an estimate of the fiscal stance.

The assessment takes into account the preliminary budget plan and the 2018 budget proposal, and it is based on an independent economic forecast produced by the Ministry of Finance. The National Audit Office presented the main points of the evaluation in a fiscal policy audit memorandum that was published on 3 November 2017.

According to the assessment of the National Audit Office, the general government fiscal position will not improve during the current parliamentary term in the manner envisaged by the Government despite more rapid economic growth. According to the calculations based on a Ministry of Finance forecast, general government structural balance, from which the impact of the improved economic situation on the fiscal position has been eliminated, will weaken in 2017 and 2018. The structural balance will be about -1.3 per cent in relation to gross domestic product in 2018, which is around 0.8 percentage points below the medium-term objective (MTO) set for it. The nominal fiscal balance will also remain below its target. This is due especially to slower-than-envisaged consolidation of the central government fiscal position.

According to the National Audit Office, the 2017 supplementary budgets are within the central government spending limits. However, the 2018 budget proposal contains an exception to the spending rule concerning funding of the Finnish Broadcasting Company, which weakens the credibility of the spending limit system. According to the preliminary estimates, Finland will be in compliance with the preventive arm and the corrective arm of the Stability and Growth Pact in 2017. When consideration is given to the flexibility granted by the Commission, Finland will be in compliance with the rules also in 2018, even though the NAOF has estimated that the change in structural balance will be around 0.2 percentage points less than required.