Finland's budget deficit is set to increase from the 10.7 billion euros anticipated in the spring to approximately 12.2 billion euros, Finance Minister Riikka Purra (Finns) announced at a press conference on Thursday afternoon.
Purra was presenting the budget proposal for 2025 drafted by her ministry this week, with the total budget amounting to 88.1 billion euros.
"There’s no reason to celebrate the current economic outlook just yet, but there are some bright spots here and there," Purra said.
She attributed the increase in debt to a weaker economic situation than previously expected.
In its report, the finance ministry estimated that without the government's austerity measures announced earlier this year, the deficit would have soared to 16 billion euros. Next year's deficit is projected to be 0.6 billion euros smaller than this year's.
The Finnish government announced a series of austerity measures and tax increases earlier this year as it looks to plug a gap of some nine billion euros worth of state expenditure during its term in office.
Prime Minister Petteri Orpo (NCP) told Yle earlier this week that he expects the Finnish economy to grow now that the "worst is behind us" in terms of austerity measures.
The four-party coalition government is scheduled to discuss the proposal during the first week of September.
Savings of €100m
The finance ministry's proposal includes compensatory savings totalling just over 100 million euros. These savings have been agreed in the past but not allocated by the ministries.
The largest of these savings is 58 million euros, which will see cuts to the amount of compensation paid by the state to municipalities for promoting integration. State funding for church and religious activities will be reduced by 20 million euros.
Savings will also be made in relation to compensation for celiac disease, adjustments to municipality groups receiving housing assistance and the hepatitis C elimination programme.
Rising expenditure
New expenditure increases amounted to 13 million euros in the budget proposal.
Purra noted that there was no room for manoeuvre when the budget was drawn up and the increases were considered to be absolutely necessary, as they relate to security and technical surveillance, for instance.
She also further stressed that the figures in relation to the spring estimates are not related to new expenditure increases.
Welfare regions' situation major concern
In the press conference on Thursday afternoon, Purra explained that aside from prolonged weak economic conditions, the rise in social and healthcare (also known as 'sote') expenses has also contributed to the deficit.
"Sote expenses are increasing despite savings. The post-audit for next year's budget reveals a 1.5 billion euro shortfall, reflecting last year's deficit that was not originally anticipated. This is a significant figure," Purra said.
The post-audit means the government will adjust funding for welfare regions upward to cover the deficit. All welfare regions have been running significant deficits since their inception.
According to Purra, social welfare spending accounts for about 30 percent of the budget. She emphasises that it is crucial for the savings previously outlined for welfare regions be implemented.
Debt ratio growth to halt by 2027
The growth of the debt ratio will stop by 2027, Purra said, provided the government's decisions, along with additional measures outlined in the government program and budget negotiations, are implemented on schedule.
However, the debt ratio will quickly start rising again if strict measures are not continued afterwards.
The figures in the budget proposal are based on the ministry's June forecast and will be revised in the autumn, when the ministry will update the forecast.
Users with an Yle ID can leave comments on our news stories. You can create your Yle ID via this link. Our guidelines on commenting and moderation are explained here.