Fiscal policy monitoring assessment on management of government finances

According to the National Audit Office’s assessment, parliamentary term objectives on the fiscal position of general government will be reached, thanks to strong economic growth.

Assessment summary

According to calculations based on the forecast by the Ministry of Finance, the structural balance of general government, from which the impact of the improved economic situation on the fiscal position has been removed, will be -0.7% in 2019. The set medium-term objective (MTO) is -0.5%.

Objectives regarding the nominal general government fiscal position and debt ratio will also be reached, mainly thanks to a cyclical increase of revenue and a decrease of expenditure. On the basis of calculations and the updated source data, the structural balance of general government bodies has not experienced any major improvement during the parliamentary term.
According to the preliminary assessment, Finland will comply with the preventive arm and the corrective arm of the Stability and Growth Pact in 2018. Although the structural balance of general government will weaken, the development will not remain significantly behind the required change when taking into account the flexibility factors granted by the Commission. On the basis of the currently available information, Finland will be compliant with the rules also in 2019, at which time the structural balance is expected to improve from the current year’s level.
The forecasts by the Ministry of Finance that were used as the basis for the draft budgetary plan cannot, according to observations made by the National Audit Office, be considered unrealistic in the manner specified in the legislation. The Ministry did increase its economic growth forecast for 2018 and decrease the 2019 forecast in the autumn. The mean value of growth for the years 2018 and 2019 combined remained the same. There is a slight risk of a need to decrease the autumn 2018 forecast, and the forecast is higher than the median forecast, whereas the forecast by the Ministry for 2019 is more conservative than the median forecast of all the forecasters that the NAOF follows.