Economic survey of Finland 2008: Executive summary

Contents | How to obtain this publication | Additional information

The following is the Executive summary of the OECD assessment and recommendations, taken from the Economic survey of Finland, published on 3 June 2008.

Contents                                                                                                                             

The Finnish economy has performed very well in recent years, with strong GDP growth in a low-inflation environment, rising employment and a sound fiscal position. Strong social safety nets and high education standards put the country in a good position to benefit from the opportunities of globalisation. However, unemployment remains high, despite rising labour shortages, pointing to significant rigidities in the labour market. In addition, the challenges of population ageing and rising health costs pose risks to the long-term sustainability of public finances. Municipalities, in particular, will face increasingly greater demands in the field of health and old-age care. The industrial structure of the economy also poses risks, since the forestry sector is under intense pressure, and even in the successful telecommunications industry, competition is strong. Structural policies do not always facilitate a rapid reallocation of resources. Unless measures are taken to improve the sustainability of the public finances, the already high tax burden will have to rise, worsening work incentives, encouraging highly skilled tasks to be offshored, and making it more difficult to attract and retain highly skilled workers in Finland. Against this background, the challenge for Finland is to find ways to modify the tax and welfare systems so that they better encourage efficiency and improve labour market incentives, without losing the benefits of redistribution and social support. Key challenges include:

• Ensuring long-term fiscal sustainability: Further pension reform is needed, and the government should ensure that the Government Programme fiscal surplus target of 3½ per cent of GDP is met.

• Raising tax revenues more efficiently: The taxation of labour should be lowered, particularly on high income earners, to help attract and retain highly skilled jobs and workers, and to limit the incentive to reclassify labour income as capital. Taxes on property are currently very low and should be raised, both because property is an immobile tax base and because it is a progressive tax. Both the corporate tax and VAT bases could be broadened, and the corporate tax rate cut.

• Making public spending more cost effective: More competition should be promoted between public and private providers of services and a level playing field ensured.

• Raising employment and promoting labour mobility: A number of challenging reforms are needed to promote wage flexibility, raise labour market participation and encourage unemployed people to accept jobs in other regions.

• Reforming the tertiary education system: The system for allocating study places is in urgent need of reform to speed the transition of young people into tertiary education. Other reforms are needed to shorten study times and ensure that degrees meet labour market needs.

• Making Finland more attractive to foreign workers: More could be done to fill job vacancies with skilled foreigners, while immigrants need more language and training assistance.

How to obtain this publication                                                                                   

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Finland 2008 is available from:

• Subscribers and readers at subscribing institutions can access the online edition via SourceOECD , our online library.
• Non-subscribers can purchase the PDF e-book and/or paper copy via our Online Bookshop 
• Order from local distributor
• Government officials with accounts (subscribe) can go to the "Books" tab on OLIS
• Acces by password for Accredited journalists 

Additional information                                                                                                  

• Economic Surveys and Country Surveillance
• Timetable of planned EDRC Meetings
• List of recent Surveys of Finland
• OECD Finland
• OECD Economics Department homepage

For further information please contact the Finland Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Anne-Marie Brook, Petar Vujanovic, Marketta Henriksson and Marte Sollie under the supervision of Peter Hoeller. Research assistance was provided by Isabelle Duong.