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Political Economy

Finnish economy back in recession but AAA credit rating still in tact

Wednesday, 05 December 2012
Finnish Gross domestic product contracted by 0.1 per cent from the previous quarter and by 1.2 per cent year-on-year meaning that the economy slipped into recession in the third quarter.
Also investments plunged in the wake of the European debt crisis, preliminary data from the national statistics agency showed Wednesday, but the credit rating agency Moody’s says Finland is expected to maintain its triple-A credit rating.

Compared to the third quarter of 2011, working-day adjusted GDP went down by 1.2 per cent. The third quarter had one fewer working day than one year previously.

"According to preliminary data, the volume of GDP has now declined in two successive quarters, which can be regarded as the criterion for recession," the agency said in a statement.

Statistics Finland said that although exports grew by 2.4 percent on the previous quarter, they contracted by 1.8 percent against the previous year. Private consumption also remained relatively slack during the quarter, inching up by 0.8 percent on the preceding period and by just 0.6percent compared to 2011. Investments painted the same story, shrinking by 1.1percent from the previous quarter and by 4.4 percent year on year.

Meanwhile credit rating agency Moody’s says Finland is expected to maintain its triple-A credit rating. Moody’s Senior Vice President, Kristen Lindow told Finnish broadcaster, Yle that among Finland’s strengths are its relatively small public debt and its well-funded pension system, which she said provides Finland with a buffer that many other countries don’t have.

Lindow added that Finland’s track record of making deep adjustments during the 1990s recession, the high degree of political consensus and flexible economy are all strengths.
However she pointed out that the fragility of major export sectors, unemployment, an ageing population and the length of working careers all pose challenges for the country's small open economy.
By scancomark.com Team

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