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Finnish Economy Faces Challenges of Euro Crisis, Aging, IMF Says

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Aug. 31 (Bloomberg) -- Finland’s economic growth will probably suffer from the European debt crisis as the country’s aging population erodes its long-term growth potential, the International Monetary Fund said.

“While Finland has strong fundamentals and a track record of good policies, the near-term economic outlook is highly vulnerable to external developments,” the Washington-based organization said in a report on its website today. “Population aging remains a challenge for long-term fiscal sustainability.”

Finland’s government should raise the statutory retirement age of 63 and tighten early-retirement plans to help pay for the expected rise in health and long-term care costs, the IMF said.

Finland’s economic growth will slow to 0.6 percent this year from 2.7 percent in 2011, before accelerating to 1.4 percent in 2013, the IMF said. The government’s budget deficit will narrow to 0.9 percent next year from 1.3 percent in 2012.

“Although Finland has benefited from safe-haven status during the European sovereign debt turmoil so far, risks to the outlook are tilted to the downside,” the IMF said.

To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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