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Finnish municipalities enjoy ample fiscal autonomy and provide or arrange the provision of a large share of public services. In recent years, their spending and debt has been increasing steadily, especially because of population ageing and increases in the cost of health care and social services.
Finland’s population is set to age rapidly in the coming decades. This will put pressure on public finances, while shrinking labour resources. Nonetheless, solutions exist to alleviate those pressures. Adjusting the pension age in line with the rise in life expectancy would reduce pension costs and increase older workers’ employment, provided it is accompanied by the removal of the pathways to early retirement.
Finland’s economy is gradually picking up, but uncertainty surrounds the recovery. Determined action to implement structural reforms is needed to revive economic growth, restore competitiveness and preserve high standards of living and well-being, according to the OECD’s latest Economic Survey of Finland.
Finland has been hit hard by the global crisis, mainly through a sharp fall in exports, and the recovery is still hesitant. Bold action is needed to find new sources of growth, regain competitiveness, ensure sound public finances, and preserve the Finnish welfare model, Mr Gurría said.
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To achieve long-term sustainable growth and preserve the country’s comprehensive welfare state arrangements in the face of demographic ageing, Finland has to implement forcefully a series of structural reforms as presented in this brochure.
Country Notes from OECD Economic Policy Reforms: Going for growth 2011 presenting OECD recommendations for structural reform priorities for individual countries.
Finland enjoys high well-being, but competitiveness has deteriorated, output has fallen and the population is ageing rapidly. Structural reforms are needed to extend working lives and raise public sector efficiency and potential growth.
The world economy is recovering, but many challenges remain to eliminate global imbalances. Countries must address the crucial question of capital movements while deepening their commitment to structural reforms, according to OECD Secretary-General Angel Gurría.
Maintaining high participation and employment in the face of the recent recession and a rapidly ageing population are major challenges for policy makers in Finland.
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This note is taken from Chapter 3 of Economic Policy Reforms: Going for Growth 2010.