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OECD Economic Surveys: Finland 2003

image of OECD Economic Surveys: Finland 2003

This 2003 edition of OECD's periodic review of Finland's economy examines recent economic developments, policies and prospects and includes special features on the effectiveness of public spending; ageing, pension reform and long-term public finances; and policies to boost potential output growth.

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Assessment and Recommendations

Finland’s medium-term growth performance has been among the best in the OECD. However, to maintain this position a number of major challenges will need to be addressed. Firstly, population ageing in Finland will occur sooner and more rapidly than in most other OECD countries. This raises the question as to how stringent fiscal policy will need to be over the coming years to ensure the long-run sustainability of public finances. It also underlines the importance of raising employment, especially among older workers. Priority should be given to reducing unemployment more generally, which is still considerably above the OECD average. Assessment of these issues needs to take account of a wide-ranging pension reform that will begin to be implemented in 2005, as well as the desirability of reducing the tax burden on labour that is still high by international comparison. Secondly, the growth of the economy over the last decade has been increasingly dependent on the contribution from the ICT-sector, but there are major uncertainties about the outlook for this sector and a large contribution to future growth cannot be taken for granted.Various policy initiatives are therefore needed to enhance growth prospects as well as ensuring they are more broadly based. Finally, policies that foster sustainable development will need to focus on cost-effective solutions to achieve the ambitious environmental targets that have already been established.

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