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Finnish central governmentborrowing
June 2020
Credit ratings
The government has credit ratings from
three credit rating agencies: S&P Global
Ratings, Moody’s Investors Service and
Fitch Ratings.
For long-term debt, they are
AA+, Aa1 and AA+
(stable, stable, stable)
22.6.2020 Finnish central government borrowing / June 2020
AA+ AA1
AA+
2
Finnish economy
22.6.2020 Finnish central government borrowing / June 2020
1
3
A global slow-down in growth hitting Finland
• The impact of the crisis estimated to be
strongest in Q2
• Public sector measures supporting
companies will not be enough to
prevent a fall in output, even when
fiscal policy in 2020 highly
accommodative
• In 2021–2022 return to pre-crisis
growth path, employment rate to return
to approx. 72%
2020 2021 2022
GDP change % -6.0 2.5 1.7
Inflation, % 0.3 1.1 1.4
Current account, %/GDP -3.1 -2.2 -1.8
Private investment change, % -9.2 0.3 3.4
Exports change % -14.0 5.5 3.8
Unemployment rate, % 8.5 9.0 8.8
Public deficit, %/GDP -7.3 -3.4 -2.8
Public debt, %/GDP 71.3 73.5 75.5
22.6.2020 Finnish central government borrowing / June 2020
Source: Ministry of Finance, Summer 2020
4
Emergency measures significantly reduce privateconsumption this year
22.6.2020 Finnish central government borrowing / June 2020Source: Ministry of Finance, Summer 2020
-8
-6
-4
-2
0
2
4
6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021* 2022**
%
Net exports Gross investments Other domestic demand GDP change
5
Slower rise in consumer prices due to slower service inflationchange from previous year, %
22.6.2020 Finnish central government borrowing / June 2020
6
Pandemic to affect goods trade in particular
22.6.2020 Finnish central government borrowing / June 2020 Source: Ministry of Finance, Summer 2020
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
10 11 12 13 14 15 16 17 18 19 20** 21** 22**
% of GDP
Current Account Balance of goods and services
7
Exports of goods well diversified
22.6.2020 Finnish central government borrowing / June 2020
Euro area (exc. Germany, Baltics)
20%
Germany15%
Sweden10%
Asia (exc. China)9%
Rest of Europe9%
USA7%
Rest of the World7%
Russia6%
China5%
Nordics (exc. Sweden)
4%
UK4%
Baltics4%
Exports by countries of destination in 2019
Forest industry19%
Chemical industry13%
Manufacture of machinery and
equipment13%Wholesale and
retail trade 15%
Other industries11%
Manufacture of metal and metal
products12%
Electric and electronics
industry8%
Manufacture of transport
equipment9%
Exports by industries 2019
Source: National Board of Customs 2/2020
8
Labour costs competitiveness improved
22.6.2020 Finnish central government borrowing / June 2020
Hourly labour cost % change from previous year
Source: Eurostat
-3
-2
-1
0
1
2
3
Euro area (19 countries) Finland
9
Relative housing prices in Finland
22.6.2020 Finnish central government borrowing / June 2020Source: Bank of Finland, November 2019
50
70
90
110
130
150
170
190
210
230M
ar-
81
Ma
r-82
Ma
r-83
Ma
r-84
Ma
r-85
Ma
r-86
Ma
r-87
Ma
r-88
Ma
r-89
Ma
r-90
Ma
r-91
Ma
r-92
Ma
r-93
Ma
r-94
Ma
r-95
Ma
r-96
Ma
r-97
Ma
r-98
Ma
r-99
Ma
r-00
Ma
r-01
Ma
r-02
Ma
r-03
Ma
r-04
Ma
r-05
Ma
r-06
Ma
r-07
Ma
r-08
Ma
r-09
Ma
r-10
Ma
r-11
Ma
r-12
Ma
r-13
Ma
r-14
Ma
r-15
Ma
r-16
Ma
r-17
Ma
r-18
Ma
r-19
Housing prices relative to rents Housing prices relative to wage and salary earnings
10
EMU general government financial balancein ratio to GDP, %
22.6.2020 Finnish central government borrowing / June 2020Source: European Commission, Spring 2020
-12
-10
-8
-6
-4
-2
0
2
4
2018 2019* 2020* 2021*
11
The public debt-to-GDP ratio in Finland is one of the lowest in the euro area
22.6.2020 Finnish central government borrowing / June 2020
EMU general government gross debt, % of GDP
Source: European Commission, Spring 2020
0
20
40
60
80
100
120
140
160
180
2018 2019* 2020* 2021*
12
Earnings-related pension assets includingpublic sector pension assets
22.6.2020 Finnish central government borrowing / June 2020
Source: Finnish Pension
Alliance
62.166.2 65.4
54.1
68.773.4
68.8
74.4
79.483.4
85.6 86.7 88.5
83.4
89.7
0
10
20
30
40
50
60
70
80
90
100
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
% of GDP
13
Funding
22.6.2020 Finnish central government borrowing / June 2020
2
14
Central government gross borrowing estimateand projected funding instrument allocation
22.6.2020 Finnish central government borrowing / June 2020Sources: State Treasury, Ministry of Finance (*forecasts)
15
0
5
10
15
20
25
30
35
40
2019 2020* 2021* 2022* 2023* 2024* 2025*
EUR bn
Redemptions Net Borrowing
0
5
10
15
20
25
30
35
40
2019 2020* 2021* 2022* 2023* 2024* 2025*
EUR bn
Euro syndications Euro tap auctions RFGB PP EMTN T-bills
Funding strategy
22.6.2020 Finnish central government borrowing / June 2020
“Maintaining a globally diversified investor base by geography and investor type”
• Euro benchmark bond curve to 30 years
• Two to three syndicated euro benchmark
bonds per year
• Expect approx. 4 auctions annually
• Liquidity in focus – Primary Dealers and
3 inter-dealer platforms (MTS, BrokerTec, BGC
E-Speed)
• EMTN issuance complements Euro benchmark
bonds
Benchmark bonds outstanding
0
1000
2000
3000
4000
5000
6000
7000
8000
€ million
By Maturing Year
16
10-year government bond yield spreads to Germany
22.6.2020 Finnish central government borrowing / June 2020
17
Primary Dealers 2020BofA Securities
Barclays Capital
BNP Paribas
Citi
Crédit Agricole
Danske Bank
Deutsche Bank
Goldman Sachs
HSBC
J.P. Morgan
NatWest Markets
Nomura
Nordea
Société Générale
22.6.2020 Finnish central government borrowing / June 2020
18
Investor base for RFGB 0.25% EUR 3bn due September 2040
22.6.2020 Finnish central government borrowing / June 2020
• Launched in June 2020
• Allocated to over 220 investors
19
Investor base for FINL 0.875% USD 1.5 bn due 2030
22.6.2020 Finnish central government borrowing / June 2020
• Launched in May 2020
• Allocated to 87 investors
45%
23%
2%
6%
9%
7%
8%
Asia
North and SouthAmerica
Benelux
Germany, Austria andSwitzerland
Nordics
Other Europe
UK
55%
19%
17%
7%2%
Central banks and officialinstitutions
Banks and banktreasuries
Pension funds andinsurers
Fund managers
Other
20
Disclaimer
NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES
The information contained herein is not for publication or distribution, directly or indirectly, in or into the United States. These materials do not contain or constitute
an offer of securities for sale, or the solicitation of an offer to purchase securities, in the United States. The securities referred to herein have not been and will not
be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent
registration under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act. The Issuer has not registered
and does not intend to register any portion of the offering in the United States or to conduct a public offering of any securities in the United States.
This presentation may include "forward-looking statements". Such statements contain the words "anticipate", "believe", "intend", "estimate", "expect", "will", "may",
"project", "plan" and words of similar meaning. All statements included in this presentation other than statements of historical facts, including, without limitation,
those regarding financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives) are
forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual
results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous assumptions regarding present and future economic or fiscal strategies and the relevant
future economic environment. These forward-looking statements speak only as of the date of this presentation and the State Treasury of Finland expressly
disclaims to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained
herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation.
This material has been prepared based upon information that the State Treasury believes to be reliable. However, the State Treasury does not represent that this
material is accurate, complete and up to date and accepts no liability if it is not. Opinions expressed are current opinions only as of the date indicated. Any
historical price(s) or value(s) are also of the date indicated.
22.6.2020 Finnish central government borrowing / June 2020
21
www.treasuryfinland.fi twitter.com/treasuryfinland
Bloomberg: STFReuters: SUVA
Contact information:
Visiting address: Sörnäisten rantatie 13, Helsinki
Mailing address: P.O. BOX 14, FI-00054 STATE TREASURY, FINLAND
Tel. +358 295 50 2000 (switchboard)
e-mail: [email protected]