The ministry says it believes Finland can control its state debt even as the government borrows another ten billion euros.
The Finnish finance ministry said on Wednesday that it believes Finland will manage to curb its debt in the coming years, despite sluggish economic growth.
The ministry, headed by Riikka Purra (Finns), last month said the state is planning to take on around ten billion euros in new debt next year. The government also wants to reduce public expenditure by six billion euros during its term.
Finland’s central government debt stood at 51 percent of GDP at the end of last year, according to ministry figures, but is currently at 59 percent.
The ministry’s budget director, Mika Niemelä, told Yle that slightly less than half of this target falls within the state budget.
“Cuts and measures to improve employment impact the entire public sector. This means that not only the state but also municipalities, welfare regions, and social security funds are involved,” he said.
The Ministry of Finance is currently engaged in bilateral negotiations with various ministries regarding next year’s budget.
Both Danske and OP banks have said that Finland’s economic growth will be non-existent next year.
Nordea meanwhile on Wednesday said it forecasts zero growth for Finland both this year and next. According to the bank, 2024 will see an inflation rate of 2.1 percent and an eight percent unemployment rate.
One of the main factors driving inflation in Finland this year is the significant increase in the average mortgage interest rate, according to Nordea.
The slowing global economy is also to blame, according to the bank, which doesn’t expect growth to return until 2025, when Finland could see a rate of 1.5 percent.
However in the longer term, Finland’s economic outlook will improve, partly thanks to investments into the country’s green transition.
“Investments in the green transition are often economically profitable and pay off through reduced energy costs,” said Nordea economist Juho Kostiainen in a press release, adding that the “impact of external energy shocks on Finland’s economy decreases when domestic electricity replaces imported electricity and fossil fuels.”