FINLAND: Moody’s Affirms Finland’s Aa1 Ratings; Maintains Stable Outlook

Tuesday May 1 2018

On 27^th April 2018, Moody’s Investors Service (“Moody’s”) affirmed the Government of Finland’s long-term issuer and senior unsecured debt ratings at Aa1.

This rating has was driven by the following factors:

1. Finland’s robust economic growth supports a gradual improvement in fiscal and debt metrics. Finland’s real GDP growth picked up in 2016-2017 after a four-year recession due to a structural decline in the key export industries (electronics and forest-related), reaching 2.6% in 2017. The economy is on a firmer footing with solid exports supported by the global cycle and more investments in euro area trade partners, private consumption growth and investment in the construction sector.
2. Despite remaining structural challenges, the Finnish authorities show significant commitment to reforms. For the period spanning the years 2012 to 2021, Moody’s expects average real GDP growth of only 1.0% in Finland, significantly below the average median of 2.2% for Aaa-to-Aa2-rated sovereigns. Unless labour force participation is increased for instance through elevated immigration, labour supply is expected to decline and to constrain potential GDP growth.

The stable outlook reflects Moody’s view that risks to Finland’s credit profile are balanced given the government’s commitment to structural reforms and fiscal consolidation, which effectively mitigates the risk of a potential deterioration in the country’s economic strength and the government’s balance sheet from age-related fiscal costs and weak potential growth

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