Monitoring and oversight operations: Fiscal policy monitoring

The ultimate goal of fiscal policy monitoring is to ensure that the fiscal policy and its preparation promote the sustainability of general government finances. The monitoring verifies the setting of fiscal policy targets and assesses compliance with rules and achievement of the targets. It also verifies the reliability of the forecasts on which the fiscal policy is built. Another goal is to promote transparent rules that are easy to understand.

The independent fiscal policy monitoring duty is governed by the Fiscal Policy Act (869/2012), the Government Decree on the General Government Fiscal Plan (120/2014), the Fiscal Stability Pact of the European Union and its common principles on national fiscal correction mechanisms (COM 2012/342), the European Union Budgetary Framework Directive (2011/85/EU) and Regulation (EU) No. 473/2013 of the European Parliament and Council.

Regular monitoring duties

The monitoring is primarily targeted at statutory duties, which include assessment of compliance with the Fiscal Policy Act and the Government Decree on the Central Government Fiscal Plan, issued thereunder, as well as an assessment of the achievement of the targets set for the general government fiscal position. The duties also include monitoring the correction mechanism included in the Fiscal Policy Act. Furthermore, the statutory monitoring duties include regular assessment of the reliability of the macroeconomic and fiscal forecasts on which the fiscal policy is based. The regular monitoring covers the preparation and implementation of the General Government Fiscal Plan and compliance with the central government spending limits. The scope of the monitoring also includes assessment of compliance with the EU Stability and Growth Pact.

As part of its monitoring duties, the NAOF issues public assessments of and opinions on the achievement of the fiscal policy targets, compliance with the rules, impact of the measures taken, and reliability of the forecasts of the Ministry of Finance.

Focus areas of operations and reporting in the planning period

The focus in the planning period will be on the development of the methods and tools used for assessing the impacts of fiscal policy measures, and the aim is to increase the capabilities for independent analysis. A key task in view of the objectives of the ongoing parliamentary term 2019–2022 will be assessing the employment-policy measures taken by the Government. The development projects will examine the usability of macro-modelling and micro-simulation. If necessary, we will also utilize external research contracts. The output gap has a key role for the rules and stance of the fiscal policy, and the NAOF will highlight the uncertainty related to its assessments and compare the results with those provided by alternative methods. Another focus area will be the sustainability of general government finances.

In 2020, an external assessment will be made of the NAOF’s fiscal policy monitoring duty, and the results of the assessment will be utilized in the development of the NAOF’s operations.

In May 2020, Fiscal Policy Monitoring will publish a final assessment of compliance with the Stability and Growth Pact and the spending limits in 2019, and an assessment of the contents of the General Government Fiscal Plan. In December 2020, the National Audit Office will submit a separate report to Parliament on fiscal policy monitoring. The report will focus, for example, on assessing the impacts of the employment-policy and other measures decided by the Government from the perspective of the objectives set for the parliamentary term.

The National Audit Office reports on its main observations in fiscal policy monitoring twice a year. The report to be published in the spring will focus on an ex-post examination of compliance with the Stability and Growth Pact and the spending limits, on preparation of the General Government Fiscal Plan, and on assessing the realism of the forecasts. The separate report to be submitted to Parliament towards the end of the year will assess the management of general government finances, compliance with the Stability and Growth Pact (ex-ante assessment), and achievement of the national goals and rules in the light of the budget proposal. The separate report to be issued at the end of 2022 will compile the observations made by fiscal policy monitoring and audit of the entire parliamentary term. The National Audit Office reports on the reliability of the forecasts of the Ministry of Finance regularly, approximately every two years. The next separate report focused on fiscal forecasts will be published in 2020.