HELSINKI: Finland suffered its first downgrade in almost a decade after Fitch Ratings cut the Nordic country’s credit rating over its failure to rein in ballooning debt.
Fitch late last Friday lowered Finland’s long-term rating by one level to AA from AA+, the lowest credit grade among the top three rating companies, almost a year after it issued a negative outlook on the debt.
Finland’s rating at Fitch is now the third-highest, eight levels above junk.
“Finland’s high government debt remains on an upward trajectory, and we do not anticipate sufficient fiscal consolidation to stabilise debt over the medium term,” Fitch said in a statement.
The news comes as the government of Prime Minister Petteri Orpo is attempting to right the course of public finances, which have suffered from consecutive deficits since 2009.
The Cabinet’s stated target is to stabilise the debt-to-gross domestic product (GDP) ratio in 2027.
In April, the coalition Cabinet unveiled a €2.3bil (US$2.7bil) package of measures to kickstart growth and investment in the subdued economy.
Lower income and corporate tax rates, as well as a smaller levies on food and medicines, are aimed at boosting purchasing power as the economy gradually recovers from two years of contraction, helped by a series of interest-rate cuts by the European Central Bank.
Underlying the efforts is an unaddressed structural shift in the export-led country’s industries. Successive governments have failed to rein in spending to match the loss of income from key industries, including papermaking and consumer electronics.
“Fitch assesses that the measures already decided are insufficient to stabilise the debt ratio over the medium term, given the high level of government spending (57.7% of GDP in 2024) due to ageing-related costs, social spending and increased defence spending,” it said. — Bloomberg
