Quarterly Review Q2/2010 (30.6.2010)

The State Treasury publishes a quarterly review at the end of March, June, September and December, including information on recent developments in debt management and an outlook for the upcoming quarter of a year.

Outlook of Public Finances

The Ministry of Finance expects the Finnish economy to turn to a path of growth, with GDP growth forecast at 1.5% this year. According to the Ministry’s estimate, the growth will be rather fast in the latter half of 2010. In particular, exports will grow again after a plunge in 2009 caused by the global recession.

The legacy of the global financial crisis and the consequent economic recession have negatively affected the Finnish public finances. However, according to the Ministry’s forecast, general government debt will still in 2010 account for sligthly less than 50% of GDP.The public deficit is expected to be 3.2% of GDP in 2010. According to the Ministry of Finance’s estimates, in 2011 Finnish public finances will again meet the criteria set in the Growth and Stability Pact, as the general government deficit is expected to shrink to 1.3% of GDP.

As regards the central government, the net financing requirement is expected to amount to some EUR 12 billion this year and EUR 8.5 billion next year. This means that central government debt will amount to some EUR 76 billion at the end of this year. Gross borrowing in 2010 is estimated to amount to some EUR 28.5 billion.

Review of Treasury Operations by the State Treasury, April to June 2010

The debt issuance will be split between Treasury Bills (estimated stock at the year end EUR 11–13 billion) and long-term bonds (estimated volume EUR 16–17 billion). In the autumn, a new benchmark bond issue and auction(s) on existing benchmark lines are foreseen.

During the second quarter of 2010, the Republic of Finland tapped the September 2014 and July 2025 benchmark bonds in an auction in April. The auction, which amounted to EUR 1.5 billion, increased the amounts outstanding to EUR 6.5 billion for the 2014 benchmark bond, and to EUR 5 billion for the 2025 bond. In June, an additional EUR 1.5 billion auction was held to tap the April 2020 benchmark bond. The amount outstanding for the bond is currently EUR 5.5 billion in total.

In May the State Treasury issued a USD 1 billion EMTN floating rate note maturing in 2011. In addition, Treasury Bills have been issued both in euros and in US dollars for the monthly maturity dates during the second quarter of 2010. The outstanding stock of Treasury Bills is currently approximately EUR 7.8 billion. The outstanding amount is likely to be increased towards the end of the year.

Near term outlook for the period of July to September 2010

A new five-year bond, which will be the second benchmark bond in 2010, will most likely be launched during September/October 2010. Further details will be given closer to the time. During the second half of the year, the State Treasury will arrange one or two bond auctions. Details and further information will be announced a week before the planned tap auctions.

The next quarterly review will be published on 30 September 2010.

For further information, please contact 

Mr. Teppo Koivisto, Director of Finance, on +358-9-7725 550 or 
Ms. Anu Sammallahti, Treasury Front Office, on +358-9-772 5575.