balance shifting into surplus, reducing the current account deficit. Better-than-expected fiscal performance brought the deficit back under the 3 percent Stability and Growth Pact (SGP) limit in 2015. Nevertheless, fiscal space is limited, as public debt reached 63.6 of GDP, which is above the SGP threshold. Banks are well-capitalized and profitable despite the weak economy and low credit demand. The recovery is likely to continue but growth is set to remain slow at about 0.9 percent in 2016 and 1.1 percent in 2017. This outlook is subject to downside risks. Weaker
deficit narrowed to -2.8 percent of GDP—a positive surprise as the original 2015 budget had forecast a -3.4 percent of GDP deficit. The better than expected outcome was driven by revenue overperformance and lower than budgeted spending, especially on public consumption. Public debt nearly doubled over the past decade and reached 63.6 percent of GDP in 2015, breaching the SGP threshold and making the government's financial position more vulnerable to shocks (Annex II). The growth in indebtedness along with the mounting pressures from aging related spending and the need
INTERNATIONAL MONETARY FUND
On behalf of the Finnish authorities would like to convey their gratitude for the comprehensive and candid discussions during the Article IV consultation and the FSAP mission. The authorities find the analysis in the reports of great value and useful for assessing progress of key reforms adopted in the government's ambitious program for reviving economic growth and stabilizing public finances, and for maintaining a well-functioning and stable financial system. The authorities' views have been accurately documented and they broadly concur with staffs analysis and policy recommendations.