Nordea: Swedish economy cooling off

For the first time in four years, economic growth in Sweden has fallen below three percent.

According to a recent report by the bank Nordea, Sweden’s gross national product grew at 2.7 percent in 2007. The bank projects growth of 2.1 percent in 2008 and 2.0 percent in 2009.

Unemployment stood at 6.2 percent in 2007 and is expected to hover around 5.7 percent in 2008 and 2009.

Sweden’s inflation rate, as measured by the consumer price index, came in at 2.2 percent for 2007, and is expected to swing up to 3.2 percent in 2008 before dropping back to 2.2 percent in 2009.

Nordea also forecasts that the Riksbank will refrain from any further interest rate hikes.

According to the report, slower global growth led by a U.S. economy headed toward recession is the main driver for lower growth forecasts in Sweden.

“But we believe that Sweden will avoid a recession on account of our active financial policies,” said Nordea’s head economist Jörgen Appelgren.

He believes the Riksbank won’t raise interest rates in 2008 and that labour market conditions will improve in the next quarter before leveling off for the rest of the year.

Sven-Arne Svensson, head economist at securities firm Erik Penser Fondkommission has a more positive outlook for Swedish economic growth in the coming years.

“We forecast a growth rate of 2.6 percent this year and 3.0 percent next year. We believe that private consumption will remain strong,” he said.