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S&P Global Ratings maintains Finland’s AA+ rating

A leading credit rating agency says economic growth in Finland will be increasingly reliant on household consumption.

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Consumers will be the drivers of economic growth rather than exports or investments. Image: AOP

Credit rating agency S&P Global Ratings announced in a credit rating analysis dated Friday that it would hold Finland’s credit rating at AA+, with a stable outlook.

The agency noted that although growth was slowing, it expected that economic activity would still support the labour market. It also projected that economic growth would largely come from domestic consumption, rather than investments.

"As Finland's economic cycle shifts into a lower gear, we believe that economic growth will come less from investments and exports and rely more on domestic consumption, as the strengthening labour market should revive private consumption and become the key growth driver", the agency's report read.

Improved exports, more reforms would boost rating

S&P Global Ratings analysts said they could raise the rating if external metrics such as exports improved, leading to bigger market shares for Finnish exports and in turn longer-lasting government current account surpluses. More reforms to address the country’s declining and ageing workforce would also boost sustainable public finances and could also encourage a better rating, the report added.

Conversely, factors that could worsen Finland’s rating include failed structural reforms that result in poorer economic growth. In addition, any deterioration in Finland’s fiscal position and possible rising debt could see the rating downgraded.

Ultimately, the current rating was said to be based on Finland's wealthy economy and "track record of stable, transparent, and effective governance and political institutions."

"The rating remains constrained, however, by Finland's relatively large external debt, which stems from its extensive pan-Nordic financial system and the resulting significant external financing needs," the report noted.

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