Fitch on Friday affirmed its top-notch AAA credit rating for recession-hit Finland with negative outlook, suggesting the new centre-right government can change the course after three years of economic contraction. "Finland has a track record of sound fiscal policy management and economic policy execution," Fitch said in a statement. However, it cut its forecasts for Finland's gross domestic product growth slightly to 0.3 percent for this year and 1 percent for 2016.
Many economists had expected a downgrade. Standard & Poor's cut its rating to AA+ already last year, and Fitch and Moody's followed up this year by changing the outlook of their triple-A ratings to negative. Finland's economy is growing slower than any other European Union state, and output is yet to reach 2008 levels, before the global financial crisis, because of a string of internal and external setbacks.
Exports dwindled after Nokia's phone business failed to compete with smartphones such as Apple's iPhone, while the paper industry also suffered from the arrival of new digital devices. At the same time, European export markets were hit by the euro debt crisis. Last year, Finland's neighbour Russia, suffering from a low oil and EU economic sanctions, fell into recession.
The government, led by millionaire Prime Minister Juha Sipila, took office in May and introduced a plan to cut 10 billion euros by 2030 to rein in general government debt, which will breach the EU limit of 60 percent per GDP this year. Last week, Sipila laid out plans to cut workers' overtime pay, holidays and sickness benefits, prompting strikes on Friday and the biggest demonstration in Finland since 1991. "The credibility of credit rating agencies is being tested. Everybody knows that Finland hasn't been in a triple-A shape for years," Aktia Bank economist Anssi Rantala said on Twitter.
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