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ECONOMY

Swedish economy in ‘long, dark winter’

Sweden’s GDP fell by 4.9 percent in the 4th quarter of 2008 compared to the same period a year before.

Swedish economy in 'long, dark winter'

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.

ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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