Finland, the new sick man of Europe? The Netherlands, getting better? - First Country Research First Country Research

During the Eurozone crisis, both Finland and the Netherlands are tough supporters of strict austerity measures. Before the crisis, the Nordic country was an economic example for the other Eurozone countries with better fundamentals than most European countries, even better than Germany.

Finland

Though Finland is struggling to get out of a long recession, its finance minister Alexander Stubb named the country the “new sick man of Europe”. This sparked a lot of attention in the media. In these challenging economic times, the Finnish government itself is now struggling to make reforms. S&P was the first to cut Finlands’ rating back in October 2014 and markets seem to have paid increasing attention to Finland during the April 2015 elections, when 10-year government bond yields rose to over 1.1% from an all-time low of 0.2%. However, when looking at the fundamentals, the economic decline was already visible in our research, three to four years earlier.

Several key indicators from our research are listed below:

An increase in external debt
Rising debt/GDP
High old-age dependency ratio and rising
Negative government structural balance
Increasing underemployment
Contracting economy
Lower exports
Low inflation, and even deflation

Nevertheless, Finland can still deal with its economic problems . Their debt-to-GDP ratio is still among the best of Europe. Furthermore, financial sector debt and bank non-performing loans are relatively low, which indicate a strong banking sector. Furthermore, there do not seem to be any major issues with the housing markets in contrast to several other Eurozone and Nordic countries.

The Netherlands

After the financial crisis in 2008-2009 the Dutch economy was struggling to recover. However, since 2013 it is recovering with positive GDP growth despite limiting production output from its natural gas field at Groningen. Key drivers for this rebound are the increase in exports, a stabilisation in the housing market, increasing reserves (special drawing rights, foreign currencies, etc.), gross capital formation growth, decreasing unemployment and an increase in both business and consumer confidence. Nevertheless the Netherlands still has some key issues.

High corporate debt.
High financial sector debt
Negative Government structural balance
Low total reserves

Ratings

The FCR credit ratings give an overview of the level of risk associated with countries worldwide. The ratings have been established by our research team and are based on a wide range of data sources. The ratings aim to assess the fundamental value of a country in order for our clients to make informed investment decisions. There is both a bond rating and a stock rating. The bond rating puts, for example, more weight on factors related to fiscal and monetary strength while the stock rating puts more weight on economic strength. A rating is determined for each seperate factor, each category and a weighted total for each country. This dashboard shows the above mentioned information for The Netherlands, Finland and for comparison also for Germany and Sweden.

At the top right corner users can select a date
Select view allows users to change the graphs
With Select Area one can select countries
Select Factor allows users to select one or multiple factors
Select Rating enables users to choose between the bond rating and stock rating

The Category History view work best if you only select one country.