Finland should refrain from stimulus measures and continue to implement reforms in spite of the nascent economic growth witnessed over the past several months, states Mikko Spolander, the director general of the economics department at the Ministry of Finance.
His statement sets a rather familiar tone for the two-day budget talks that are set to begin at the Ministry of Finance on Tuesday.
“The cyclical growth spurt, however, does not create new assets for the public economy to re-distribute, nor would a stimulus-based fiscal policy be appropriate in the current circumstances. What the economy needs is not greater demand but greater in order to be able to grow at a higher rate in the future,” he writes in an online column.
“An upturn is the appropriate time to reform the structures of the economy in a way that improves the preconditions for growth,” adds Spolander.
The Ministry of Finance recently underlined that although the economic situation allowed the national economy to exceed expectations in the first half of the year, the country would be ill-advised to re-consider its commitment to fiscal austerity.
Spolander points out that the economy is close to utilising its capacity in full.
“A shortage of skilled labour is beginning to emerge. The upturn should not be boosted by adopting a more stimulus-based fiscal policy,” he says.
He reminds that as long as the government budget continues to show a deficit in the region of billions of euros, there is no latitude to cut taxes or bump up government spending. The temporary injection of revenues brought about by the recent growth spurt should rather be regarded as an opportunity to consolidate government finances by paying back debt.
The Ministry of Finance has predicted that the growth rate will slow down to around 1–1.5 per cent after the cyclical growth spurt unless reforms are introduced to improve the productivity of the economy. If Finland is intent on achieving a higher growth rate, the main objective of its economic policy should be to raise the employment rate considerably, according to Spolander.
Aleksi Teivainen – HT
Photo: Vesa Moilanen – Lehtikuva
Source: Uusi Suomi