15 May 2019

Finland's aging population begins to strain the budget

By 2050, Finland's working-age population will only comprise 58% of the total population. The country's comprehensive welfare system is already beginning to feel the strain.  

Editorial Team
Jessica Sirotin NewsMavens, Europe
Finland's aging population begins to strain the budget - NewsMavens
Woman, Finland, PixaBay

Why this story matters:

Finland provides its citizens with one of the most comprehensive welfare states in Europe, complete with taxpayer-funded health and social care and schooling. However, trouble is looming for the country and its relatively small population of 5.5 million -- its population is aging faster than the rest of Europe.

The birth rate in Finland has declined steadily ovre the past eight years and continues to slide.

The decline in the birth rate means that the percentage of working-age citizens will fall from its current 62 percent to 60 percent by 2030, and to 58 percent by 2050.

This demographic decline will have severe and potential dangerous repercussions for the government's finances, as fewer workers will be contributing to the welfare system while increasing numbers of elderly citizens will be taking more out. 

This sustainability gap, according to economists, will eventually offset the successful effort of the central bank to lower public debt in relation to economic output. Central bank officials are calling for early planning to restructure the economy to forestall adverse effects.

Details from the story:

  • To deal with the issue, outgoing Prime Minister Juha Sipilä favored an austere economic policy, cutting public spending at the same time as he launched an overhaul of the administration of public services, seeking to create a smaller number of regional centers to oversee health and social care provisions.
  • But efforts have slowed, and according to S&P: “Public sector consolidation is progressing, but longer-term sustainability of public finances is contingent on reforms to boost labor supply and enhance productivity.”
  • Incoming PM Antti Rinne  will have to reinvigorate efforts to restructure the ecomony for these changing demographics. 
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