Summary: KEY ISSUES Finland’s record of strong economic growth has stalled with the economy in recession for three out of the last five years, largely because of domestic structural weaknesses and a challenging external environment. Weak productivity and high wage growth have eroded competitiveness, amplifying the effects of the declining ICT and paper sectors. This has led to high unemployment and added to longer-term aging- related fiscal pressures. Household debt continues to rise, adding to the highly concentrated banking system’s vulnerability to regional shocks. Absent reforms, the outlook remains for a slow and fragile recovery. The priorities are reforms for growth, credible, but gradual, fiscal consolidation, and measures to address lingering financial stability concerns. • Bold and rapidly implemented structural reforms would improve labor market performance and boost productivity, while facilitating structural adjustment. The government reform program is making progress, but the full agenda has yet to be implemented. • Credible fiscal adjustment phased-in over the medium-term would support fiscal sustainability while protecting the fragile recovery. A frontloaded fiscal adjustment, as is envisaged in the government’s recent spending limits decision, could weaken the recovery. A better alternative would be to increase the pace of consolidation only as the economy strengthens, along with structural reforms to raise medium-term growth. • Strengthening the macroprudential framework is critical. This would help guard against underlying vulnerabilities and promote regulatory harmonization within the Nordic region. The full scope and flexibility of CRD IV/CRR instruments should be deployed, including establishing a systemic risk buffer and making LTV caps effective.

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.