NATO Entry May Shield Finland From Investment Risks, Report Says

(Bloomberg) -- Finland may become more attractive to foreign investors if Russia's Nordic neighbor joins the NATO defense bloc, according to ETLA Research Institute.

The country, which shares a 1,300 kilometers (800 miles) border with Russia, is expected to bid for membership in the North Atlantic Treaty Organization as early as this month after their former imperial master's invasion of Ukraine triggered a tectonic shift in Finns' backing for entry into the alliance.

NATO entry would most likely cement Finland's position as an investment destination, even though the financial markets do not yet show an increase in the country risk, ETLA's Managing Director Aki Kangasharju and Head of Forecasting Markku Lehmus write.

Russia has repeatedly said a NATO entry by both Finland and its western neighbor Sweden, which are among the world's most developed nations with stable democracies and highly trusted political institutions, would have “serious military and political consequences.”

Overall, the immediate economic impact of the Russia's war in Ukraine is likely to be small on Finland, but the situation could worsen, ETLA said.

The impact from a rise in interest rates and a withdrawal of central bank stimulus are first seen as a loss of venture capital in peripheral areas such as Finland, the institute said. In addition to NATO membership, Finland should now deploy all other policies too that reduce the negative impacts on its position, including attracting migration and R&D funding for new innovations, it added.