City economy

The assessment examined the state of the economy of the City of Helsinki and City Group in 2021 and how the economy had developed from the previous years. Another subject of examination was whether the objectives, set in the City Strategy, of restricting the increase in operating costs and of financing investments were realised.

The increase in operating costs exceeded the limits determined by the City Strategy, which is, given the pandemic, understandable. However, the economy of the city still has a sound foundation. The city has succeeded every year in reducing the amount of long-term debt in the parent city, even though the city’s investment costs have been high. In other words, during the strategy period, the investments were implemented according to the objective with internal financing so that the loan portfolio per resident has not grown.

Internal financing remained high for the second consecutive year, partly thanks to the one-off COVID-19 compensations paid by the state. The financial losses caused by the pandemic are replaced by the compensations paid in 2020 and 2021 which are likely to be removed in 2022. However, the city has started its own pandemic recovery package that includes appropriations for 2022 and 2023.

Both the pandemic and the social welfare and health care reform have had a significant impact on the economy. The treatment and service backlog created by the pandemic and the costs caused by the backlog are difficult to estimate. The social welfare and health care reform is estimated to slow the growth of the city’s tax revenue down and to weaken the capacity for investments. Separating the health care and rescue services and making them operations only funded with state subsidies and governed by the state is a structural change the difficulties of which are difficult to predict.