Govt forecasts wider sustainability gap in public finances

The Ministry of Finance predicted on Monday that the country will face a wider sustainability gap in public finances during the coming decade.

Declining birthrates and aging population will put a strain on public finances. The ministry said the gap could grow up to four percent in relation to the GDP during the 2020s.

"Because of the aging population, it is more difficult than earlier to amass a buffer in public finances," Marja Paavonen, a senior official with the ministry said at a press conference.

Bringing the sustainability gap into control has been a key theme of the two recent governments. The gap means that public sector spending will exceed the available income.

"To endure the growing costs, the financing of the public sector would need higher employment and growth," the ministry said.

It predicted the Finnish economy will grow only 1.5 percent next year, while the growth in 2018 is 2.5 percent. Employment level in the country could reach 73 percent in 2021, compared to the current figure of 71.6 percent.

The ministry cautioned against rejoicing in amortizing the public debt. This past week Finland was able to make the national debt smaller for the first time in ten years.

The ministry experts described the change as temporary, and said no permanent correction in the imbalance in the public sector had taken place.