Finland must be prepared to deal with a possible fallout of the intensifying euro area debt crisis despite strong economic fundamentals and sound fiscal policies, the International Monetary Fund said on Monday.
"Spillovers to Finland could be significant given its highly open economy and trade and financial linkages with Europe," the lender said in a Article IV Consultation concluding statement.
"Thus, the key immediate policy concern is to cushion the downturn, including through a nimble fiscal policy, while mitigating any lingering vulnerabilities."
The IMF mission expects Finland's growth to slow sharply to about 0.5 percent this year, before picking-up in 2013. The risks to the outlook are tilted to the downside, with heightened uncertainties, the lender said.
Risks mainly include the uncertainty about financial market developments, with possible tensions for bank funding leading to deleveraging and tighter credit.
Further, spillovers from a deeper and more protracted slowdown in the euro area than now projected also poses a major threat to the Finnish economy, the IMF said.
by RTT Staff Writer
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