Credit rating agency Moody’s latest report on Finland commends the policies of the Finnish government and explains the reasons behind Finland’s excellent creditworthiness. According to Moody’s Investor Service, Finland’s Aaa rating with stable outlook is supported by the Finnish government’s multiple credit strengths, including its consensus-oriented and proactive policy framework, the relative health of public finances and the fact that the country as a whole is a net creditor vis-à-vis the rest of the world.
Moody’s also notes that the Finnish financial system is well-regulated with high-quality assets and good capital adequacy. In addition, Finland’s education system is among the world’s best, which converts into an innovative and skilled workforce. Susceptibility to event risks is also low following diminished risks arising from the euro area.
Responding to challenges
According to Moody’s, Finland’s credit weaknesses relate mainly to a steep downturn in demand for output from telecommunications and forestry, and an extended deterioration in Finland’s terms of trade. However, Finland’s rating outlook is stable because the authorities have responded to these challenges with reforms designed to regain competitiveness, to spur growth in both the short and long term, and to address the fiscal and social consequences of an ageing population.
The government has reached broad agreement on tough measures to close the ‘sustainability gap’ within the next four years and to continue to honor the European fiscal rules to the letter. Another round of pension reform is now being discussed by the social partners, with a view to reaching an agreement that can be implemented by 2017. Moody’s report is an update to the markets and does not constitute a rating action.