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Finland's public sector balance sheet

Author

Listed:
  • Maren Brede

    (International Monetary Fund, School of Business and Economics, Humboldt-Universitat zu Berlin, Berlin, Germany)

  • Christian Henn

    (International Monetary Fund, Washington, DC, USA)

Abstract

We construct comprehensive public sector balance sheets for Finland for 2000–2016 by complementing general government statistics with data on public corporations and pensions. These static balance sheets show that Finlands public sector net worth at end 2016 was –160 percent of GDP, after having registered considerable fluctuations previously, including due to asset holdings sensitivity to equity valuations. We then expand the analysis to an intertemporal balance sheet by adding present value estimates of future fiscal flows. This allows performing fiscal stress tests and policy experiments. These suggest that Finlands public finances will remain sound if ongoing reform efforts to address aging pressures yield their expected savings. Under this assumption, intertemporal financial net worth (IFNW) of the public sector would exceed 50 percent of GDP–well within the 30–85 percent of GDP range derived in stress tests as the needed buffer to maintain positive IFNW in light of a severe shock.

Suggested Citation

  • Maren Brede & Christian Henn, 2019. "Finland's public sector balance sheet," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 19(1), pages 176-194.
    • Handle: RePEc:bic:journl:v:19:y:2019:i:1:p:176-194
    DOI: 10.1080/1406099X.2019.1585062
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    More about this item

    Keywords

    Public sector balance sheet; intertemporal fiscal balances; debt sustainability; Finland;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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