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Finnish finances boosted by employment pensions

FINLAND – Finnish general government finances are set to be boosted by the employment pensions sector, the finance ministry says.

“Because of the growth in tax revenues, central government finances will still be slightly in surplus and thanks to the employment pension sector, the surplus in general government finances will be close to 2.5%,” the ministry said in an economic bulletin today. This compares to May’s estimate of two percent.

The figures came as rating agency Moody’s Investor Services said that the country’s finances are still vulnerable to population ageing.

“Government finances remain vulnerable to demographic pressures despite ongoing pension reforms and substantial system pre-funding,” New York-based Moody’s said in a release.

"Any further delay in adopting well-conceived reforms of the labour and product markets - many of which already are discussed openly in the public arena - is unwise given the detrimental population trends," said Kristin Lindow, Moody's lead analyst for Finland.

"We believe that concerted action should be taken urgently if
Finland is to sustain its sound macroeconomic performance and financial health over the longer term."

Moody’s also said there were “deepening” concerns about the diminishing prospects for a significant investment revival, which would further threaten growth potential.

In its annual report on Finland, Moody's credited Finland’s Aaa/Prime 1 ratings “to careful economic management and deep-rooted social consensus”.

It said: “Finland's economic profile features low government debt and a healthy government balance sheet in addition to robust external payments surpluses.

Lindow added: "Government finances confounded expectations by staying in surplus during recent years in spite of the cyclical global downturn and coincident slump in the information and communications technology sector."

Last month the government decided to bring forward the increases in the national pension that were included in its programme and the benefits tied to the national pension. The increase set for the beginning of 2006 will now come into effect from March 1, 2005.

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