(Adds comments, detail, government reforms)
HELSINKI, June 21 (Reuters) - Finland’s finance ministry lifted its growth forecasts on Wednesday, citing recovering exports, and called once again for the government to take advantage of the upswing to reform the economy and cut public debt.
The euro zone’s northernmost member is returning to growth after a decade of stagnation sparked among other things by the decline of Nokia’s former phone business, rigid labour markets and a recession in neighbouring Russia.
The ministry expects gross domestic product to grow 2.4 percent this year, 1.6 percent in 2018 and 1.5 percent in 2019 against forecasts in April for growth of just 1.2 percent in 2017, 1.0 percent in 2018 and 1.2 percent in 2019.
“Conditions are improving for growth in exports as global export demand is rising and businesses are becoming more cost-competitive. After years of negative contribution, foreign trade will begin boosting GDP growth,” a ministry statement said.
However, the ageing population will mean an increase public spending and government debt after 2020, sending the debt-to-GDP ratio up from existing levels of about 64 percent, it said.
“The upswing will not resolve structural problems in the economy. Long-term growth prospects are muted, with insufficient revenue to cover public spending over the long term,” it said.
The centre-right government, which this week survived a coalition crisis, is looking to implement a complicated health care and local government reform to cut future spending.
However, it is set to fall short of its target to lift the employment rate to 72 percent from 69 percent by 2019, the ministry said, calling for more reforms to boost employment. (Reporting by Tuomas Forsell Editing by Jussi Rosendahl and Louise Ireland)