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Finland Country Risk Reports Q2 2015

Finland Country Risk Reports Q2 2015

Core Views

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
Autos
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 , %

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