Finland has been a pillar in the Eurozone economic bloc, but the central has warned of an impending financial crisis that could rival Italy’s, pressuring the long-term outlook on the Finnish economy and related exchange traded fund.
According to the Bank of Finland, the government does not have many options in filling a 9 billion euro, or $12.3 billion, deficit gap as the country struggles with the fastest aging population in the Eurozone, leaving the economy vulnerable to shocks, reports Kasper Viita for Bloomberg.
Finland’s “costs related to aging will grow faster than elsewhere within the next two decades,” Petri Maeki-Fraenti, an economist at the Bank of Finland, said in the article, highlighting aging costs as a “decisive” factor in accelerating debt growth after 2020.
The central bank suggests the government should begin to reform spending or face skyrocketing debt that could reach 110% of gross domestic product by 2030. Finland’s debt-to-GDP stood at around 53.6% in 2012.
According to the Finance Ministry, the economy will only grow 0.8% in 2014 after a 1.2% contraction in 2013. The Bank of Finland expects long-term growth to average 1.5%, compared to an average 3.7% expansion between 2003 and 2007. Finland is part of a dwindling number of nations that still have AAA credit ratings.
“We must get used to slower economic growth for an extended period of time,” economist Maeki-Fraenti said.