World's happiest country, Finland, gets credit rating downgraded by Fitch — here’s what went wrong

Finland, which tops the World Happiness Report 2025 for the eighth consecutive year, has witnessed Fitch lowers Finland's economic rating to 'AA' over what the credit ratings agency said due to rising debt, and lack of fiscal consolidation. Fitch on Friday downgraded Finland's rating to "AA" from "AA+", citing rising debt and a lack of sufficient fiscal consolidation to stabilise the country's public finances over the medium term. This comes as Finland's economy is showing only a modest recovery from a prolonged recession, weighed down by trade policy uncertainty, sluggish private consumption and ongoing fiscal challenges. However, the rating agency has affirmed that the country's outlook as 'stable'.

Finland - World's Happiest Country

Finland has once again been crowned the happiest country in the world. Published on March 20, 2025, by the Wellbeing Research Centre at Oxford University in collaboration with Gallup and the UN Sustainable Development Solutions Network, the ranking reflects average life-satisfaction ratings from 2022 to 2024.


Finland earned an impressive average score of 7.736 out of 10, placing ahead of other Nordic peers—Denmark (2nd), Iceland (3rd), and Sweden (4th)—alongside emerging leaders like Costa Rica, Mexico, and the Netherlands, which made the top ten for the first time.

Experts say Finland’s happiness is built on strong foundations of social trust, cohesion, and equality. Citizens trust one another and public institutions alike, creating a sense of security and belonging that outshines GDP alone. The country’s model emphasizes generous welfare systems, accessible healthcare and education, and flexible work-life balance ― factors that collectively reduce stress and social inequality.

Finland Economy is Failing? Why?

Finland Government initiatives aimed at stimulating growth, including tax cuts and increased public spending, face headwinds from global tariffs, persistently high unemployment and rising public debt. The government had pledged to stabilize public debt by the end of 2027 but admitted it would fall short of its original goal to reduce the fiscal deficit to 1 per cent of gross domestic product by then.

However, Fitch assesses that the measures currently in place are insufficient to stabilize the debt ratio over the medium term, given persistently high government spending – at 57.7 per cent of GDP in 2024 – driven by ageing-related costs, social expenditure and increased defense spending.

It also expects the country's general government debt ratio to continue rising, surpassing 90 per cent of GDP by 2029, significantly above the estimated median for peers with an "AA" rating.

In April, Finland announced tax breaks for companies and employees, reducing the corporate tax rate to 18 per cent from 20 per cent and providing personal tax relief totalling about 1.1 billion euros ($1.29 billion).

"Tax cuts taking place in 2026 and 2027 also increase pressure on the budget," Fitch said in a statement.

Fitch said it considers major fiscal consolidation before the April 2027 elections unlikely. A draft rule submitted in June aims for a 1 per cent annual debt reduction but includes a five-year transition period and faces political and credibility risks.

FAQs

Q1. Which is happiest country in world?
A1. Happiest country in world is Finland.

Q2. What is Fitch rating for Finland?
A2. Fitch on Friday downgraded Finland's rating to "AA" from "AA+", citing rising debt and a lack of sufficient fiscal consolidation to stabilise the country's public finances over the medium term.