The National Audit Office estimates that the Ministry of Finance forecasts used as a basis for the draft budgetary plan are realistic. The present memorandum contains the main findings of the National Audit Office’s preliminary assessment of the general government finances in 2017 and 2018. The draft budgetary plan and the budget proposal for 2018 are also considered in the memorandum.
Summary of the assessment
According to the assessment of the National Audit Office, the general government fiscal position will not improve during the current parliamentary term in line with the targets set by the Government, despite faster than anticipated economic growth. According to the calculations based on the Ministry of Finance forecast, general government structural balance, from which the impact of the cyclical component on the fiscal position has been eliminated, will weaken in 2017 and 2018. The nominal general government balance will also not achieve its target during the current parliamentary term due to slower-than-envisaged consolidation of central government finances. The 2017 supplementary budgets comply with the spending rule. The 2018 budget proposal contains an exception to the spending rule, which concerns the funding of the Finnish Broadcasting Company. Incorporating the appropriation of EUR 18.6 billion earmarked for county financing in the central government spending limits will present challenges to the compliance with the spending limits in 2019, the last year of the current parliamentary term, and, consequently, with the overall spending limits for the parliamentary term.
According to a preliminary estimate, Finland will be in compliance with the preventive arm and the corrective arm of the Stability and Growth Pact in 2017. When taking into account the flexibility granted by the European Commission, Finland will also be in compliance with the two arms in 2018.
According to the forecast produced by the Ministry of Finance, there will be a deviation of 0.2 percentage points from the required adjustment of the structural balance, even when the flexibility clauses are taken into account.
The National Audit Office estimates that the Ministry of Finance forecasts used as a basis for the draft budgetary plan are realistic. The substantial change in the forecast, compared with spring 2017, is justified in the light of the latest statistical data on the economic situation. The forecasts made by the Ministry of Finance are also in line with the figures presented by other forecasting institutes.