HELSINKI – From positive to stable

Credit rating agency Fitch Ratings has downgraded Finland’s Issuer Default Rating (IDR) to AA+, from positive to stable. This is a reminder of Finland’s growing debt and worsening demographic trends.

According to the agency, fiscal policy has remained too loose despite a cycle in which medium-term growth continues to be weak and healthcare reform is not being carried out.

Fitch also stated that Sanna Marin’s government’s “one-off” programme which intends to invest €3 billion in healthcare, labour market initiatives and education up to 2023, would not fully address pressing issues. The Finnish political system is said to suffer from “reform fatigue” after changes in governments and prime ministers. Little effort is being made with regard to improving external competitiveness, meaning that a lot is at stake in the ongoing collective wage negotiations, for which talks have proved difficult so far.

Furthermore, Fitch points out that the projected reversal of Finland’s public debt trajectory is in contrast to the majority of its ‘AA’ and ‘AAA’ rated category peers such as Germany, Denmark, Sweden and Austria. And compared to the majority of ‘AA’ and ‘AAA’ category countries, medium-term growth is also predicted to be weaker. 

Predictably, Fitch’s arguments have divided the political landscape.

While the government says they are yet another reason to continue and push forward, the opposition claims the government has lost the plot.

For this year, the Bank of Finland predicts a 0.9% growth compared to a 1.1% growth rate for the next year, and 1.3% in 2022. (Pekka Vänttinen |

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