World Economy

Moody’s Downgrades Finland Growth

Moody’s Downgrades Finland GrowthMoody’s Downgrades Finland Growth

Finland faces the loss of its top credit rating at Moody’s Investors Service as the country struggles to escape an economic contraction that’s lasted since 2012.

Prospects on the northernmost euro member’s long-term Aaa were lowered to negative from stable, the company said in a statement Friday. The rating was affirmed. Moody’s cited the government’s worsening budget deficit and mounting debt as reasons for the weaker outlook, Bloomberg reported.

“Finland has experienced, and continues to face, a prolonged period of low economic growth, which has reduced its economic resilience to shocks and also has negative repercussions for its public finances,” Moody’s said. “While there are some signs of positive momentum, potential growth remains low.”

Rating companies, which for a time during the debt crisis rated Finland as the top credit in the single-currency region, are now starting to turn pessimistic as one government after another fails to live up to promises and economic contraction shows no signs of letting up. Gross domestic product declined 0.1 percent in the first quarter, the national statistics office reported on June 4.

Finland lost its top credit grade at S&P in October, while Fitch Ratings in March reduced prospects on its AAA to negative.

Even so, Finland’s debt costs suggest the country is still viewed as a haven by investors. The yield on 10-year government bonds closed at 0.881 percent yesterday, just higher than the euro area’s lowest yield at 0.844 percent in Germany. That compares with 2.224 percent for Spain.

The coalition government that took power in 2011 allowed public debt to increase as economic growth proved elusive. It missed all its key goals and lost April’s general elections to the opposition Center Party.

Prime Minister Juha Sipila has now put together a three-party coalition that promises to get debt expansion to slow by 2019 and halt by 2021 with austerity measures.