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Swedish economy in 'long, dark winter'

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Swedish economy in 'long, dark winter'
12:37 CET+01:00
Sweden's GDP fell by 4.9 percent in the 4th quarter of 2008 compared to the same period a year before.

Between the third and fourth quarters of 2008, Sweden's economy sank 2.4 percent, according to figures from Statistics Sweden released on Friday.

“It's obvious that Sweden finds itself in a very powerful economic slowdown. We're in a long, cold, dark winter,” said Minister of Finance Anders Borg.

“It's quite clear that such a reading is correct.”

Economists had estimated that Sweden's GDP, which measures to total sum of goods and services sold within the country, would fall by 2.0 percent on an annual basis, according to a survey by Reuters.

“It's markedly weaker than what the market had forecast. It was certainly a negative surprise on all fronts,” said Swedbank interest rate and currency analyst Cecilia Skingsley to the TT news agency.

“This is probably what the Riksbank sensed when they cut rates by 100 basis points two weeks ago. And our forecast is that they will continue cutting rates by at least an additional 50 basis points when they meet in April.”

The annual basis drop is Sweden's first since the country's statistics agency began recording quarterly economic statistics in 1994.

Not once since then has Sweden's economy shrunk on an annual basis. A previous low point was in 1996, when the GDP shrunk in the second quarter by 0.5 percent compared with the previous quarter.

The figures confirm that Sweden is now in a recession, said Robert Bergqvist, chief economist at the SEB bank.

"The Swedish economy has shrunk a great deal and is now quite weak," he told TT.

Statistics Sweden spokeswoman Sofia Runestav also told AFP that revised figures showed the country had in fact entered recession in the second quarter of 2008 and not in the third as previously stated.

Sweden, which has been especially hard-hit by the troubles plaguing car makers worldwide, saw its exports fall 7.2 percent, imports decrease 5.4 percent, and industrial production shrink 6.1 percent in the fourth quarter.

"These are very dramatic numbers," Swedish Prime Minister Fredrik Reinfeldt told the TT news agency.

"We usually boast about our export-driven economy. Now we're seeing the negative side: a global downturn that is affecting Swedish exports," he added.

Household consumption also fell by 3.3 percent during the fourth quarter.

Following the news, market interest rates dropped and the krona weakened, trading at more than 9.10 kronor to the US dollar and 11.50 kronor to the euro.

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