Population ageing and rising public debt are setting a high bar for economic policymaking
15.6.2021 11:00:00 EEST | Suomen Pankki | Press release
The Finnish economy is making a swift recovery from the pandemic. The powerful monetary and fiscal policy measures have helped to prevent a significant and long-lasting shortfall in aggregate output. It has been averted in spite of the sharp decline in output experienced at the beginning of the pandemic and the repercussions still being felt by many businesses and households.
The long-term prospects for the Finnish economy are being weighed down by weak productivity growth compared with past decades, a low employment rate by Nordic standards, and an ageing population. These are factors that constrain the output of the economy and hence the debt-servicing capacity of the public sector.
The productivity slowdown is related to low levels of investment. ‘Finland's weak productivity growth suggests that we need to foster stronger incentives for innovation. One effective solution would be a wide and permanent tax relief for R&D. As for skills, the worrying decline in the average level of educational attainment of young adults is a trend that needs to be reversed,’ noted Bank of Finland Governor Olli Rehn.
The Finnish economy has fallen well behind its Nordic peers during the past fifteen years. ‘Finland can close the gap to the other Nordic countries by enacting economic reforms, and it is crucial that we improve our economy's ability to adapt to changes in the environment. There is still work to be done to shore up Finland's employment rate to a good Nordic level,’ summarised Governor Rehn.
The level of general government debt has grown rapidly during the pandemic, and it is to be expected that public debt will continue to grow even after the acute phase of the crisis. ‘As better cyclical conditions and economic growth are forecast for next year, fiscal policy ought to be steered in a direction that promotes the sustainability of the public finances. A return to central government spending limits without undue delay is key both for the sustainability of the public finances and for the credibility of the spending limits framework’, stated Governor Rehn.
Economic activity in the euro area is recovering as the pandemic recedes. Business and consumer confidence have improved markedly. Inflation has increased due to one-off and temporary factors and higher energy prices, but there are currently no signs of a rise in broader price pressures in the euro area. The COVID-19 situation continues to loom over the euro area outlook, and economic slack remains high.
The ECB Governing Council decided at its June 2021 meeting that it would continue to conduct net asset purchases under the pandemic emergency purchase programme at least until the end of March 2022 and, in any case, until it judges that the pandemic crisis phase is over. ‘Pandemic emergency purchases will be conducted in a flexible manner to help counteract the disinflationary effects of the pandemic and support growth. Accommodative financing conditions are a key element in supporting the recovery of the euro area economy,’ clarified Governor Rehn.
Keywords
Images
Links
About Suomen Pankki
The Bank of Finland is the national monetary authority and central bank of Finland. At the same time, it is also a part of the Eurosystem, which is responsible for monetary policy and other central bank tasks in the euro area and administers use of the world’s second largest currency – the euro.
Subscribe to releases from Suomen Pankki
Subscribe to all the latest releases from Suomen Pankki by registering your e-mail address below. You can unsubscribe at any time.
Latest releases from Suomen Pankki
I juni 2026 lyftes mindre stuglån än året innan28.7.2026 10:00:00 EEST | Pressmeddelande
Under början av 2026 har volymen av lyfta fritidsbostadslån varit något lägre än under motsvarande period föregående år. Den genomsnittliga räntan på nya stuglån var i juni 2026 högre än för ett år sedan. En större andel av de nya stuglånen än tidigare var bundna till tre eller sex månaders Euribor.
Kesäkuussa 2026 mökkilainoja nostettiin vuodentakaista vähemmän28.7.2026 10:00:00 EEST | Tiedote
Alkuvuoden aikana vapaa-ajanasuntolainoja on nostettu hieman vähemmän kuin viime vuonna vastaavana aikana. Uusien mökkilainojen keskikorko oli kesäkuussa korkeampi kuin vuosi sitten. Aiempaa suurempi osa uusista mökkilainoista sidottiin 3 tai 6 kuukauden euriborkorkoon.
Drawdowns of holiday cottage loans declined in June 2026 from last year28.7.2026 10:00:00 EEST | Press release
The volume of loans for holiday homes drawn down in the first half of the year was slightly lower than in the corresponding period last year. The average interest rate on new holiday cottage loans was higher in June than a year earlier. A larger share of new holiday cottage loans than previously was linked to the 3- or 6-month Euribor.
Better now to keep interest rates unchanged24.7.2026 13:10:00 EEST | Blog
You don’t have to be much of a fortune-teller to note that there is continuing uncertainty both in the Finnish summer and in the global economy. On a chilly summer’s day like the one we’ve experienced this week, a Finn can simply stoke a fire in the sauna stove – problem solved. Unfortunately, there is no silver bullet to economic uncertainty. Rather than fanning the flames, we need to keep a cool head.
Utkasten till framtida eurosedlar har offentliggjorts – Ville Tietäväinens förslag har gått vidare23.7.2026 17:56:14 EEST | Nyheter
Ett förslag från Finland har gått vidare i formgivningstävlingen för de framtida eurosedlarna. Ville Tietäväinens sedelserie baserar sig på temat ”Floder och fåglar”. De förslag som gick vidare valdes ut genom en formgivningstävling i hela Europeiska unionen.
In our pressroom you can read all our latest releases, find our press contacts, images, documents and other relevant information about us.
Visit our pressroom
