Finnish central government borrowing - vk-wordpress-bucket ... · Emergency measures significantly...

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


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


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, %


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


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


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


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


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


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


“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


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


18

Investor base for RFGB 0.25% EUR 3bn due September 2040


• Launched in June 2020

• Allocated to over 220 investors

19

Investor base for FINL 0.875% USD 1.5 bn due 2030


• 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.


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]

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