The threat of terrorism in Finland has risen since 2017, while weaker relations with Russia raise the risk of state-sponsored cyber-attacks. Finland’s high levels of trade union membership pose business interruption risks due to labour strikes.
Relations between Helsinki and Moscow have weakened following Russia’s involvement in the conflict in eastern Ukraine and violations of Finnish airspace. In March 2018, Finland expelled a Russian diplomat over the poisoning of Sergei and Yulia Skripal in the United Kingdom, to which Russia has responded in kind. Direct conflict between Finland and Russia remains highly unlikely, but Russian-sponsored cyber-attacks pose a risk to businesses operations in Finland.
In September 2017, internet connections on the Åland archipelago in the southwest of Finland were disrupted by a denial-of-service attack, which was likely linked to Russian military exercises in the area. While the risk of terrorism in Finland remains relatively low, in June 2017 the Finnish Security Intelligence Service (Supo) raised the terrorism threat level to “elevated“.
According to Supo, the number of individuals under surveillance rose by 80% between 2012 and 2017 to 350. In August 2017, a knifeman killed two people and injured 8 others in an Islamist terrorist attack in Turku on the Baltic coast, while three Finns were charged with plotting terrorist activities in Syria in October 2017. Finland has high levels of gun ownership, increasing the likelihood of mass casualties in the event of a terrorist incident.
While Islamic extremism will pose the primary terrorist threat, the risk of clashes between anti-immigrant far-right protesters and counter-demonstrators has increased following the Turku attack, particularly in urban centres such as Tampere and Helsinki as well as Turku itself. In December 2016, far-right demonstrations in Helsinki attracted around 3,000 supporters and resulted in damage to public property. Businesses may also be affected by non-violent strike action, as around 80% of Finland’s working population belongs to trade unions. In April 2018 for instance, the Finnish Construction Trade Union announced that it would carry out a number of labour strikes over the proceeding two months due to wage disputes.
Growth has returned to the Finnish economy following a period of contraction from 2012 to 2014, but structural constraints limit the country’s economic potential. Finland’s real GDP is estimated to have grown by 3.0% in 2017, driven by export gains and a recovery in private consumption.
However, an ageing population and high labour costs undermine the economic outlook, and growth is forecasted to slow to 2.4% in 2018. EU sanctions against Russia have limited Finland’s export potential and the Finnish economy continues to rely on telecommunications company Nokia. However, the trajectory of public finances remains stable, as public debtto- GDP ratio is forecasted to fall from 61.5% of GDP at the end of 2017 to 60.1% by the end of 2019.
In January 2018, President Sauli Niinisto was re-elected for a second term with a commanding 62.7% of the vote. His administration has pursued business-friendly reforms such as the “Competitiveness Pact”, an agreement signed between Finnish unions and employers’ organisations in June 2016 that cuts public sector bonuses and extends annual working hours. In addition, a number of state-owned firms are likely to be partially privatised while measures have already been announced to increase competition in the rail sector.
However, political uncertainty weighs on the investment outlook. Finland’s coalition government has prioritised health care and local government reforms that would strengthen public finances by cutting EUR 3 billion in costs, yet strong opposition to the reforms in parliament raises the risk that they will not be approved. If the reforms are not passed in a vote scheduled for June 2018, Prime Minister Juha Sipila has threatened to dissolve the coalition, which would prompt an early general election. Such a scenario would undermine policy stability and investor confidence.
In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Tunisia, Ghana, Belarus and Finland all of which have been the subject of recent enquiries from JLT's client base.
The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.
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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email firstname.lastname@example.org
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