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Fitch maintains Finland's credit rating, lowers growth forecast

The credit ratings agency has affirmed Finland's AA+ rating, saying the outlook for the Nordic country's economy looks positive.

Fitch Ratings -luottoluokituslaitoksen rakennus New Yorkissa.
Fitch Ratings headquarters in New York Image: Justin Lane / EPA

One of the top three credit ratings in the world, Fitch Ratings, has affirmed its assessment of Finland's creditworthiness at AA+, the second-best rating possible, in its latest regular analysis.

The agency gave Finland a positive outlook when it came to fiscal finances, due to the country's "high value-added economy, strong governance indicators, solid macroeconomic policy institutions and high degree of fiscal financing flexibility". The fact that public debt in Finland has been brought down to below 60 percent of the country's GDP was also seen as a favourable development.¨

Falling GDP growth in the pipeline

The agency however lowered its real GDP growth estimate for 2018 slightly, from 2.7 percent to 2.3 percent, since its last appraisal in August.

"We expect economic growth to decelerate further to 1.5% and 1.2% in 2019 and 2020. The Finnish economy reached a cyclical peak in 2017, and growth in 2018 slowed down faster than expected. […] Net trade has been the main drag on growth, reflecting weaker external demand from key EU trading partners," Fitch's report read.

Fitch's assessment maintains that measures in Prime Minister Juha Sipilä's hard-wrought 2016 competitiveness pact have helped boost employment, lower unit labour costs and restore export competitiveness, but warns that a rapidly ageing population and underlying structural issues in the labour market continue to constrain potential growth.

Another minus listed in the report was the key risk inherent in increasing levels of household indebtedness, which Fitch says had reached 116.4 percent of disposable income at the end of 2017.

The ratings agency predicts that the April 2019 parliamentary elections are "unlikely to result in a marked shift in fiscal policy direction". It also casts doubt on the government's ability to pass its longstanding social and healthcare reform package before the election.

The two other major credit agencies, Standard & Poor's and Moody's, last produced similar status assessments of Finland's economic prospects last autumn.

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