Assessment of public finances 2021 : Time for fiscal policy to refocus on the future

Abstract

Managing the consequences of the COVID-19 pandemic still requires a lot of work, but in many sectors of Finland’s economy the engines are already firing on all cylinders. The elevated structural deficit in the country’s public finances will need to be remedied in the wake of the pandemic, when the longer term expenditure pressures related to an ageing population start to swell steadily, turning into today’s issues and problems. At the same time, future challenges such as climate change mitigation call for political action, and this will also affect the fiscal balance and the level of debt. In fiscal policy there must be a return towards more balanced budgets, but new spending on matters that are always deemed indispensable makes this difficult.