Abstract
This has driven the economy into recession for the past three years. The impact on growth and exports of the parallel structural declines of Nokia and the paper industry has been exacerbated by weak external demand, including from Russia and the euro area. Wage hikes in 2008-10 and weak productivity growth have hurt competitiveness. Rapid population aging is a further drag on growth. Pre-crisis current account surpluses have become deficits and the fiscal position has deteriorated. The nascent recovery is fragile and, absent reforms, medium-term growth will be much slower than before the crisis.
Fund Relations
(As of September 30, 2015)
Membership Status: Joined January 14, 1948; Article VIII.
General Resources Account:
| SDR Million | Percent of Quota | |||
| Quota | 1,263.80 | 100.00 | ||
| Fund holdings of currency | 1,121.00 | 88.70 | ||
| Reserve Tranche Position | 142.80 | 11.30 | ||
| Lending to the Fund | ||||
| New Arrangements to Borrow | 217.98 | |||
| SDR Million | Percent of Quota | |||
| Quota | 1,263.80 | 100.00 | ||
| Fund holdings of currency | 1,121.00 | 88.70 | ||
| Reserve Tranche Position | 142.80 | 11.30 | ||
| Lending to the Fund | ||||
| New Arrangements to Borrow | 217.98 | |||
SDR Department:
| SDR Million | Percent of Quota | |||
| Net cumulative allocation | 1,189.51 | 100.00 | ||
| Holdings | 1,123.38 | 94.44 | ||
| SDR Million | Percent of Quota | |||
| Net cumulative allocation | 1,189.51 | 100.00 | ||
| Holdings | 1,123.38 | 94.44 | ||
Outstanding Purchases and Loans: None
Latest Financial Arrangements: None
Projected Payments to Fund:
(SDR million; based on existing use of resources and present holdings of SDRs):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2015 | 2016 | 2017 | 2018 | 2019 | |
| Principal | |||||
| Charges/Interest | 0.01 | 0.05 | 0.05 | 0.05 | 0.05 |
| Total | 0.01 | 0.05 | 0.05 | 0.05 | 0.05 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2015 | 2016 | 2017 | 2018 | 2019 | |
| Principal | |||||
| Charges/Interest | 0.01 | 0.05 | 0.05 | 0.05 | 0.05 |
| Total | 0.01 | 0.05 | 0.05 | 0.05 | 0.05 |
Exchange Rate Arrangements:
Finland’s currency is the euro, which floats freely and independently against other currencies. Finland has accepted the obligations under Article VIII, Sections 2(a), 3, and 4 of the Fund’s Articles of Agreement. It maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions, except for those measures imposed for security reasons in accordance with Regulations of the Council of the European Union, as notified to the Executive Board in accordance with Decision No. 144-(52/51).
Article IV Consultation:
Finland is on the 12-month consultation cycle.
FSAP Participation:
Finland will have a review under the Financial Sector Assessment Program (FSAP) in 2016.
Statistical Issues
(As of October 22, 2015)
Assessment of Data Adequacy for Surveillance:
General: Data provision is adequate for surveillance.
Data Standards and Quality
Subscriber to the Fund’s Special Data Dissemination Standard (SDDS) since June 3, 1996. Uses SDDS flexibility options for timeliness on data for central government operations.
A data ROSC was electronically published on October 31, 2005
(http://www.imf.org/external/pubs/cat/longres.cfm?sk=18675.0).
Finland: Table of Common Indicators Required for Surveillance
(As of October 22, 2015)
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government, including National Insurance Scheme, and local governments.
Including currency and instrument composition.
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Reflects the assessment provided in the data ROSC (published in October 2005, and based on the findings of the mission that took place during May 10–25, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); or not observed (NO).
Same as footnote 8, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items: | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodologic al soundness8 | Data Quality–Accuracy and reliability9 | ||||||
| Exchange Rates | 10/07/15 | 10/07/15 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | 08/2015 | 10/2015 | M | M | M | ||
| Reserve/Base Money | 08/2015 | 10/2015 | M | M | M | ||
| Broad Money | 08/2015 | 10/2015 | M | M | M | ||
| Central Bank Balance Sheet | 08/2015 | 10/2015 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | 08/2015 | 10/2015 | M | M | M | ||
| Interest Rates2 | 10/13/15 | 10/13/15 | D | D | D | ||
| Consumer Price Index | 09/2015 | 10/2015 | M | M | M | O, O, O, O | LO, O, LO, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | 2014 | 03/2015 | A | A | A | LO, LO, LNO, O | LO, O, O, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government | 2014 | 03/2015 | A | A | A | ||
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 09/2015 | 10/2015 | M | M | M | ||
| External Current Account Balance | 08/2015 | 09/2015 | M | M | M | O, O, O, LO | LO, O, LO, O, O |
| Exports and Imports of Goods and Services | 08/2015 | 09/2015 | M | M | M | ||
| GDP/GNP | Q2 2015 | 09/2015 | Q | Q | Q | O, O, O, O | LO, O, LO, O, O |
| Gross External Debt | Q2 2015 | 09/2015 | Q | Q | Q | ||
| International Investment Position6 | Q4 2014 | 09/2015 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government, including National Insurance Scheme, and local governments.
Including currency and instrument composition.
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Reflects the assessment provided in the data ROSC (published in October 2005, and based on the findings of the mission that took place during May 10–25, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); or not observed (NO).
Same as footnote 8, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items: | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodologic al soundness8 | Data Quality–Accuracy and reliability9 | ||||||
| Exchange Rates | 10/07/15 | 10/07/15 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | 08/2015 | 10/2015 | M | M | M | ||
| Reserve/Base Money | 08/2015 | 10/2015 | M | M | M | ||
| Broad Money | 08/2015 | 10/2015 | M | M | M | ||
| Central Bank Balance Sheet | 08/2015 | 10/2015 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | 08/2015 | 10/2015 | M | M | M | ||
| Interest Rates2 | 10/13/15 | 10/13/15 | D | D | D | ||
| Consumer Price Index | 09/2015 | 10/2015 | M | M | M | O, O, O, O | LO, O, LO, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | 2014 | 03/2015 | A | A | A | LO, LO, LNO, O | LO, O, O, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government | 2014 | 03/2015 | A | A | A | ||
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 09/2015 | 10/2015 | M | M | M | ||
| External Current Account Balance | 08/2015 | 09/2015 | M | M | M | O, O, O, LO | LO, O, LO, O, O |
| Exports and Imports of Goods and Services | 08/2015 | 09/2015 | M | M | M | ||
| GDP/GNP | Q2 2015 | 09/2015 | Q | Q | Q | O, O, O, O | LO, O, LO, O, O |
| Gross External Debt | Q2 2015 | 09/2015 | Q | Q | Q | ||
| International Investment Position6 | Q4 2014 | 09/2015 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government, including National Insurance Scheme, and local governments.
Including currency and instrument composition.
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Reflects the assessment provided in the data ROSC (published in October 2005, and based on the findings of the mission that took place during May 10–25, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); or not observed (NO).
Same as footnote 8, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.
Past Fund Staff Recommendations and Implementation
| Past Staff Recommendations | Implementation |
|---|---|
| Fiscal Policy | |
| Gradual fiscal adjustment in line with the strength of the economy, focused on medium-term reforms to close the sustainability gap. | Since 2011 the government has implemented fiscal consolidation measures worth about 3 percent of GDP in nominal terms. Pension reforms should reduce the fiscal sustainability gap by 1 percentage point of GDP. |
| Make the composition of adjustment as growth friendly as possible. | The standard VAT rate, energy and excise taxes were raised to allow for a broadly revenue neutral corporate income tax rate cut in 2014. |
| Allow automatic stabilizers to operate if growth is weaker than expected. | Unemployment benefit spending was allowed to rise in 2014 as growth disappointed. |
| Labor Market Policy | |
| Pension reforms to lift the effective retirement age would support labor force growth. | Pension reforms currently being legislated will raise the average effective retirement age to 62.4 years old by 2025. |
| Reforms of tertiary education and student aid could promote longer working lives. | Measures to reform tertiary education financing, including reducing the duration of student aid are being implemented. |
| Increasing the quantity of affordable housing in Helsinki would facilitate labor mobility. | An agreement was reached between the central government and municipalities in the Helsinki area to increase land available for development. |
| Competition Policy | |
| Measures to increase competition in services and product markets can boost productivity growth. | Proposals to liberalize shop opening hours should increase retail sector competition. |
| Financial Sector Policy | |
| Implement the European macroprudential policy framework (CRD-IV/CRR), including a systemic risk buffer and binding loan-to-value (LTV) ratio. | The 2014 Act on Credit Institutions introduced the required CRD IV/CRR instruments, as well as a maximum LTV ratio. |
| Designate the independent Board of the FIN-FSA as the macroprudential policy authority. | The Act established the FIN-FSA as the designated macroprudential authority and the FIN-FSA board as the decision making body for macroprudential decisions. |
| Implement the Bank Recovery and Resolution Directive (BRRD) and reach regional agreements on bank resolution with other Nordic countries. | The legislation implementing the BRRD has been in effect since January 2015. This addresses the resolution of financial market crises, creates a new crisis resolution structure for domestic authorities, and establishes a new Deposit Guarantee and Resolution Fund. |
| Past Staff Recommendations | Implementation |
|---|---|
| Fiscal Policy | |
| Gradual fiscal adjustment in line with the strength of the economy, focused on medium-term reforms to close the sustainability gap. | Since 2011 the government has implemented fiscal consolidation measures worth about 3 percent of GDP in nominal terms. Pension reforms should reduce the fiscal sustainability gap by 1 percentage point of GDP. |
| Make the composition of adjustment as growth friendly as possible. | The standard VAT rate, energy and excise taxes were raised to allow for a broadly revenue neutral corporate income tax rate cut in 2014. |
| Allow automatic stabilizers to operate if growth is weaker than expected. | Unemployment benefit spending was allowed to rise in 2014 as growth disappointed. |
| Labor Market Policy | |
| Pension reforms to lift the effective retirement age would support labor force growth. | Pension reforms currently being legislated will raise the average effective retirement age to 62.4 years old by 2025. |
| Reforms of tertiary education and student aid could promote longer working lives. | Measures to reform tertiary education financing, including reducing the duration of student aid are being implemented. |
| Increasing the quantity of affordable housing in Helsinki would facilitate labor mobility. | An agreement was reached between the central government and municipalities in the Helsinki area to increase land available for development. |
| Competition Policy | |
| Measures to increase competition in services and product markets can boost productivity growth. | Proposals to liberalize shop opening hours should increase retail sector competition. |
| Financial Sector Policy | |
| Implement the European macroprudential policy framework (CRD-IV/CRR), including a systemic risk buffer and binding loan-to-value (LTV) ratio. | The 2014 Act on Credit Institutions introduced the required CRD IV/CRR instruments, as well as a maximum LTV ratio. |
| Designate the independent Board of the FIN-FSA as the macroprudential policy authority. | The Act established the FIN-FSA as the designated macroprudential authority and the FIN-FSA board as the decision making body for macroprudential decisions. |
| Implement the Bank Recovery and Resolution Directive (BRRD) and reach regional agreements on bank resolution with other Nordic countries. | The legislation implementing the BRRD has been in effect since January 2015. This addresses the resolution of financial market crises, creates a new crisis resolution structure for domestic authorities, and establishes a new Deposit Guarantee and Resolution Fund. |