Overview of central government risks and liabilities : Autumn 2022

Abstract

Central government liabilities have been on a rising trend for many years. They have increased not only in terms of nominal value but also in relation to the size of the economy. The crises of the past few years have intensified this long-term trend. Just before the start of the financial crisis in 2008, central government debt totalled EUR 54 billion, representing 28 per cent of GDP. At the end of 2021, central government debt amounted to about EUR 129 billion, which is over 51 per cent of GDP. Central government contingent liabilities have also shown strong growth over a long period. At the beginning of the last decade, the government’s guarantee and collateral liabilities totalled about EUR 23 billion, or about 12 per cent of GDP. At the end of 2021, liabilities amounted to EUR 64 billion, bringing the debt-to-GDP ratio to over 25 per cent. Significant growth in liabilities over a long period, combined with moderate long-term growth prospects, have weakened the central government’s risk-bearing capacity. Moving forward, it would be important to strengthen the sustainability of general government finances to ensure Finland is prepared to face new negative economic shocks in the future