IMF warns Swedish banks off Baltic investments

The International Monetary Fund (IMF) has warned Swedish banks that the global credit crisis means increased risks for Swedish banks investing in the Baltic area.

In their country report on Sweden, the IMF pinpointed Swedbank and SEB banks as two banks with extensive investments in the Baltic area.

The banks are active in Estonia, Latvia and Lithuania where economic growth has slammed to a sudden halt and where rising inflation is a fact.

According to the IMF, Sweden is hardly affected by the American real estate crisis, but warned the two banks to be particularly vigilant regarding their Baltic investments.

However, the Swedish Riksbank believes these fears are exaggerated, and that those banks active in the Baltic market will have no trouble keeping their heads above water should the Baltic economy crash.

Mattias Persson, head of the Swedish Riksbank’s financial stability department told the TT news agency that risk is always a factor, but that Swedish banks have sufficient buffer zones that can deal with a Baltic crash if necessary.

The International Monetary Fund assessed Swedish economic growth at 2 percent this year compared to 2.7 percent last year. They predict that economic growth will decrease to 1.7 percent next year.