Finland's position as an investment location and business environment is still stable
According to credit rating agencies, Finland's outlook and position as an investment location as well as business environment for the companies is still stable, says Finnvera’s chief economist Mauri Kotamäki. This will also encourage domestic companies to take forward their investments and develop their operations. Credit rating agency Fitch maintained Finland’s credit rating at AA+ in it’s analysis on Friday 8 April 2022. S&P Global Ratings came to the same conclusion about a month earlier.
Finland's attractiveness as an investment location has been a topic of conversation because of the Russian invasion.
”Fitch's recent report states that credit rating agencies, as external and impartial players, do not appear to be particularly concerned about Finland's creditworthiness as a neighbor of Russia”, says Mauri Kotamäki, chief economist for Finnvera.
Russia's invasion of Ukraine has affected moods in Finland. The key driver is the increase in uncertainty. For example, the fear of cyber attacks from Russia in Finland has also increased. The realisation of political risks through sanctions against Russia are real. In addition, the movements of millions of refugees from Ukraine are putting the countries in a new situation.
The war has also further reinforced the already existing challenge caused by inflation. The prices of many raw materials produced in Russia and Ukraine have started to rise, although the price level of many has already recovered after the worst initial shock subsided.
”There are plenty of challenges and we do not know how long we will live in an atmosphere of war. However, the Finnish economy seems to be resilient from the point of view of both preliminary statistics and independent credit rating agencies. Obviously, Finland is still worth investing in. This will also encourage domestic companies to further their investments and develop their operations so that they are better prepared to overcome crisis and reach growth”, says Kotamäki.
No acute risk of recession
According to Kotamäki, Finland is not in acute danger of slipping into recession, although the scenario cannot be completely ruled out in conditions of increased uncertainty. The concrete direct effects at the level of the national economy will remain moderate, although in the case of a single company focused exclusively on the Russian market, the situation may be very difficult.
”The slowdown in Russian trade will naturally affect Finland, but the direct effects at the level of the national economy will remain relatively small. Finland's exports to Russia in 2021 amounted about four billion euros, or less than a couple of per cent of the total national economy. Many of these commodities will soon find a new buyer in other markets. This is also how Finnvera assesses the sentiment at this stage”, notes Kotamäki.
Long-term economic challenges are a concern
However, credit rating agencies highlight Finland's long-term public finance challenges.
”The population is aging and the proportion of the elderly population will continue to grow for another decade. This means automatically increasing public spending and Fitch is understandably concerned about this as well”, says Kotamäki.
Mauri Kotamäki, chief economist, Finnvera, tel. +358 29 460 2878
Finnvera funds its lending operations by issuing debts under the EMTN programme (Euro Medium Term Note). The debt issued the programme is explicitly guaranteed by the Republic of Finland (AA+/Aa1/AA+).
Link: Investors | Finnvera