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ECONOMY

Strong Swedish growth during the autumn

Statistics Sweden reported that GDP rose by 3.8 per cent year-on-year, but the figures should be taken with a grain of salt, according to Sven-Arne Svensson, Skandiabanken’s chief economist.

Foreign trade in services contributed 1.2-percentage points to the increase in GDP in the third quarter but Svensson questioned the correctness of the figures and pointed out that the concept of foreign trade in services is diffuse.

Nevertheless growth is healthy and is expected to be around 3.5 to 3.8 per cent in 204. In addition, a welcome surprise is that investments have increased by 8.8 per cent in the third quarter.

Resolution on sick leave

As expected, the Swedish Riksdag passed a resolution last week forcing employers to pay 15 per cent of their employees’ sick pay from the 15th day of sickness and as of 1 January 2005.

The Confederation of Swedish Enterprise has warned that many employees who are on long-term sick leave will lose their jobs as a result of the reform but yesterday Hans Karlsson, minister for employment, promised to change the rules, should the Confederation’s fears be realised.

Arla merges with Campina

On Wednesday it was confirmed that Arla, the Swedish/Danish dairy group, would merge with Dutch dairy Campina, provided the owners approve the deal.

Campina Arla will become the second-largest dairy company in the world, and the largest that is owned by a co-operative of farmers. The new company will have 28,000 employees and annual turnover of 10 billion euro.

Rörstrand pulls out of Sweden

Rörstrand, the porcelain maker, is pulling out of Sweden after 279 years. 155 employees in Lidköping will be made redundant when Rörstrand transfers production to Asia or Eastern Europe.

Billion kronor market for Skanska

The enlargement of the EU has had a positive impact on Skanska’s order books with the construction firm winning orders to a value of 13 billion crowns in the Czech Republic and Poland in the past few months.

“The building sector in the new EU states is strong, particularly within infrastructure but even in commerce,” said Peter Gimbe, Skanska’s information director.

Suspected leak at Gambro

Gambro is to be investigated by the Swedish Financial Supervisory Authority after news leaked out that the healthcare company was to sell its dialysis clinics in the US to DaVita.

Sources: Dagens Nyheter, Svenska Dagbladet, Dagens Industri

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ECONOMY

Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s. 

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