Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Finland (long-term local and foreign-currency issuer and senior unsecured debt ratings: AA+/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 27 March 2023.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Finland’s AA+ long-term ratings reflect the following credit strengths: i) a wealthy, resilient and modern economy, which benefits from a highly qualified labour force and a strong infrastructure in future economic areas such as digitalisation and the environmental transition; ii) high government debt affordability, with fiscal resilience anchored to the government’s ample net financial asset position and a favourable debt structure; and iii) high institutional quality, with Finland ranking among the best countries globally in terms of regulatory quality and respect for the rule of law, accompanied by a strong track record of implementing structural reforms. 

Finland’s economy and public finances proved resilient to the Covid-19 pandemic and the shocks related to Russia’s war in Ukraine. Scope expects the economic outlook to weaken this year with a mild contraction, however, as inflationary pressures remain elevated and financing conditions tighten further. Higher interest rates are also affecting the fiscal outlook, on top of still elevated costs for defense spending, energy support measures and the rollout of the new health and social services organisation, which are set to contribute to a widening fiscal deficit for the government. Scope expects a return to economic growth and gradual fiscal consolidation as of next year, although the debt-to-GDP ratio is set to remain on a slightly upward trajectory. In Scope’s view geopolitical risks for Finland, which shares a 1,300km border with Russia, are strongly mitigated by the country’s strong international alliances, which are moreover set to strengthen further as the country’s application to NATO is likely to go through to full membership this year.

Finland’s ratings are constrained by challenges related to: i) the country’s moderate growth potential, curbed by weak productivity dynamics and labour market rigidities in the context of a declining working-age population; ii) rising fiscal pressures from Finland’s ageing population that weigh on the medium-term trajectory of public finances; and iii) financial stability risks, including those arising from the large size of the Finnish banking sector relative to that of the domestic economy.

The Stable Outlook reflects Scope’s view that risks to Finland’s ratings over the next 12 to 18 months are balanced.

The ratings/Outlooks could be upgraded if, individually or collectively: i) the country’s economic growth outlook improved significantly, and/or ii) the fiscal outlook improved notably via a sustained debt reduction.

Conversely, the ratings/Outlooks could be downgraded if, individually or collectively: i) the medium-term economic growth outlook deteriorated significantly; ii) the fiscal outlook notably weakened, resulting in a material increase in government debt; iii) financial stresses were to crystallise, with damage to the financial and non-financial private sector balance sheets hampering the economic and fiscal outlook; and/or iv) geopolitical risks were to escalate significantly, threatening macroeconomic stability.

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Giulia Branz, CFA, Senior Analyst

© 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.