Finland Country Risk Reports Q2 2015
Over the short term, we believe that Finland's fiscal situation remains one of the most robust in Europe, and do not expect it to suffer from a ratings downgrade in the near future, expecting it to remain one of just four remaining countries in the eurozone to be awarded AA status from all three major ratings agencies.
However, over a longer time horizon, looming structural challenges pose a threat to public debt dynamics and may impede fiscal flexibility.
Several key sectors, including forestry and papermaking, shipbuilding and telecommunications remain in terminal decline, while high labour costs are acting as a deterrent for investment and importers of Finnish goods, despite strong structural competitiveness. This has cast doubt over the government's ability to sustainably increase aggregate demand through fiscal stimulus.
Major Forecast Changes
In light of our forecast for Russia's economy to collapse by 5.2% in 2015, we have downgraded our forecasts for Finland too, as international trade will experience lower volumes as a result. We now forecast real GDP to contract by -0.1% in 2015, from a previous forecast of +0.9%.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks To Outlook
- Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Foreign Policy
- Finland To Remain An Obstacle To Greek Negotiations
- Finland is once again obstructing bailout negotiations between Greece and the Eurozone. With the National Coalition party's popularity
- weak, we expect they will continue to resist any efforts that might inflame anti-euro sentiment domestically.
- Table: Politic al Over view
- Long-Term Political Outlook
- Structural Economic Decline Poses Greater Political Risks
- B road and stable coalition governments will maintain policy continuity in Finland over the next decade while protecting individual
- freedoms. Nevertheless, a structural economic slowdown could see social tensions rise in line with unemployment, while relations with
- neighbouring Russia could deteriorate further.
- Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Activity
- Facing A Lost Decade
- Finland's economy is facing a confluence of short-term external shocks and structural adjustments which have brought economic activity
- grinding to a halt. Diminishing private sector investment risks pushing Finland into a lost decade.
- Table: GDP By Expenditure
- Balance Of Payments
- Russia Crisis To Weaken Trade
- Finland's current account deficit is likely to widen over the coming quarters due to weaker external demand from Russia.
- Table: Curent Acount
- Chapter 3: Key Sectors
- Table: Autos Total Market – Historical Data And Forecasts
- Other Key Sectors
- Table: Pharma Sector Key Indicators
- Table: Telecoms Sector Key Indicators
- Table: Infrastructure Sector Key Indicators
- Chapter 6: BMI Global Assumptions
- Global Outlook
- New Era For Oil
- Table: Global Asumptions
- Table: Developed States , Real GDP Growt H, %
- Table: BMI VERSUS BLO MBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- Table: Emerging Markets , Real GDP Growth , %