National preparations well under way
The Council of the European Union has today approved the abrogation of its decision on the existence of an excessive deficit in Finland. This was based on the situation of the public finances last year. The general government deficit was 2.6 per cent of GDP, while the gross debt was 58.7 per cent of GDP. The European Commission forecasts the deficit to decrease to 1.9 per cent of GDP and the debt ratio to increase slightly to 59.1 per cent of GDP this year. This is well in line with national forecasts. According to the convergence programme updated in September 1996, a surplus in public finances will be achieved in 1999 and maintained thereafter. Also, the public sector debt is set to decrease starting from this year.
In terms of the other convergence criteria, the outlook seems equally promising. Measured with the harmonised consumer price index, inflation is forecast to stay at 0.7 per cent in this year. The long-term interest rates are around 6.2 per cent at the moment. Finland joined the ERM on October 14th last year. Since then, as for some two years before the ERM-link, the Markka has been by and large stable.
Forecasts of economic growth for this year have been raised to 4 - 5 per cent of GDP. Therefore economy is poised for a sustained decrease in unemployment, which is forecast to be under 15 per cent of the labour force thisyear. The external balance is in surplus, the current account showing a surplus of 3 per cent of GDP.
Due to the favourable economic situation, international rating agencies have upgraded their ratings on Finnish long-term loans. Standard & Poor's increased its rating to AA in December last year, Moody's followed suit in January this year, to Aa1. Most recently, IBCA upgraded its rating of Finland in late April to AA+.
A national change-over scenario for Finland was presented in mid-April by the EMU-project of the Ministry of Finance. The scenario covers practical preparations for the EMU in society on the whole. A wide range of representatives of citizens, enterprises and the public sector took part in preparing the scenario.
In early May, a report on the economic consequences of EMU was presented by a working group of experts, which was given its mandate by the Prime Minister. The Government will submit a report on the implications of EMU-participation to the Parliament later this month. After that a Parliamentary debate on EMU is expected. The Parliament is expected to make a political decision of Finnish EMU-participation early next year.