Finland's public sector balance sheet

Maren Brede and Christian Henn ()
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Maren Brede: International Monetary Fund, School of Business and Economics, Humboldt-Universitat zu Berlin, Berlin, Germany
Christian Henn: International Monetary Fund, Washington, DC, USA

Baltic Journal of Economics, 2019, vol. 19, issue 1, 176-194

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.

Keywords: Public sector balance sheet; intertemporal fiscal balances; debt sustainability; Finland (search for similar items in EconPapers)
JEL-codes: H00 H55 H60 H63 H68 H75 H81 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:19:y:2019:i:1:p:176-194

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