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Sweden faces 'late exit' from recession: IMF

Paul O'Mahony · 7 Aug 2009, 17:57

Published: 07 Aug 2009 17:57 GMT+02:00

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Swedish banks' exposure to economies in the Baltic region has contributed to persistent market doubts, the IMF said in a report that follows its consultation in late July with Swedish authorities. The international financial body noted that "steps to strengthen banks further—including raising private capital where necessary—should be undertaken as soon as possible."

The IMF estimated that Swedish GDP would shrink by 6 percent in 2009, with a "modest" recovery to be expected in mid-2010.

Sweden's export composition and the regional role of its banks meant that the country had been hit harder than most by the global downturn.

The IMF said it "welcomed the authorities’ prompt and appropriate policy responses, which have allayed immediate concerns with financial sector stability, and helped cushion domestic demand."

But the country's prospects for recovery are largely dependent on overseas developments, it added.

Story continues below…

"If global demand for Sweden’s output bundle recovers slowly relative to other components, Sweden could have a late exit out of the current recession," the IMF said.

Paul O'Mahony (paul.omahony@thelocal.com)

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Your comments about this article

18:27 August 7, 2009 by browneyes10
Oh God, come on Sweden being a foreigner I think you are the great country and I am confident that you can recover bit earlier from this current recession situation.

Well wisher for Sweden.


jobless foreigner.

19:04 August 7, 2009 by DaveN
Of course, if the IMF are such experts on things like exposure to dodgy markets, bank liquidity, financial sector stability etc, then it's a pity they didn't say something before the poop hit the fan.
22:04 August 7, 2009 by Jan M
To be fair they are qualified to comment but they can't control national economies. If a country or its people are greedy and image obsessed they're going to get hurt. I am thinking USA, UK and to some degree bits of Sweden (particularly the Stockholm mindset).
00:07 August 8, 2009 by Weekend_warrior

Very educational video for you all.

Sweden/ Europe is going to have to wait on the United States to get out of this recession, before they can even see the light at the end of the tunnel.

And with unemployment continually rising, even all the redundancies in Sweden I just read about that haven't gone into effect yet. What is there going to be a jobless recovery?

Commercial real estate is starting to show problems now as well. By 2010/11 a lot of Alt-A mortgages are coming due and we'll see if they can all refinance. Expectations of 48% of American homeowners will be underwater.

America has written down near 50% of their problems while all of Europe has only reached 17% last I looked. So they have quite a few hundred billion to go. I don't even want to think about the Baltics/East Europe collapsing because it could spell the end of the Euro.
10:00 August 8, 2009 by Dorset
The problem is that the USA hasn't atoned for anything. It creates it housing bubble by flooding the world with debt and then creates more debt to "wrtie down" their malinvestments. That's the real crisis, what to do with the dollar.
10:12 August 8, 2009 by Nemesis
I think the IMF needs to take of its USA blinkers.

This recession is not global. China, India and Brazil are steaming ahead at present. China had at worst a blip and is heading for 8% growth again. South Korea is already recovering.

As for Europe. The problem is there is no agreement on how to regulate the banks, due to the UK and Ireland being against any agreement where the banks are properly regulated.

It is time that Spain, Ireland, Italy and the UK had there banking sectors properly regulated with investments backed up by actual equity, not wishful thinking in an equation.

We don't need USA banking in Europe. We need to find our own European way. Also the dollar needs to be dropped as the main currency as it is to volatile. China's idea of a basket of currency's is the first sensible thing I have heard on the subject or switch to Euro trading.
18:23 August 9, 2009 by Greg in Canada
Well, the Bank of Canada officially anounced last week that our recession is over, but everybody is a bit skeptical since recovery is going to be painfully slow, not only here but all over the world. Our banks were much more regulated than in the USA so we didn't have the huge mortgage crash and were considered one of the countries best equipped to survive the recession. To my understanding, Sweden was about middle level for recovery. I'm surprised to read the IMF is saying that Sweden will have a late recovery.
15:55 August 10, 2009 by farnoxo
No doubt the IMF report is based on the findings of one of their economists - and we all know just how accurate economists were in predicting the global credit crisis in the first place (with apologies to Robert Shiller, who I suspect is actually an engineer at heart :-)
10:14 August 11, 2009 by skane refugee
Although having the economic advantage of being relatively commodity-rich ... Swedens economy (on a much smaller scale of course) shares some similarities with Germany in that it relies heavily on net exports of engineered/manufactured products

The key dynamics are the health of major export markets on the revenue side, and the ability to stay ahead of Asian competition on the cost/design side

German exports have unexpectedly resumed growth (7% if I recall right) in the last monthly data, and as a result, some pundits are calling an early exit from recession there

Where Germany goes, Sweden is likely to follow. Could be some surprises on the upside

Hope recovery comes quickly enough to save as much as possible of Swedens manufacturing base

the clouds on the horizon for Swedens economy are coming from the Baltic States, where Swedish banks have lent the equivalent of 25% (hope that figure is now lower!) of Swedens GDP to local businesses and individuals

yesterdays front-page news on the Financial Times was the S&P debt downgrades for the Baltic States ... this could be the beginning of the end for those countries currency pegs to the Euro ... forced devaluation of their currencies will be bad news indeed for Swedbank and SE Banken ... and by implication Swedish taxpayers if they are forced to step in to stabilise/rescue the Swedish banking system :-(
16:58 August 18, 2009 by Kevgio
anyone that thinks the recsession is over and believing these hype stories is delluding themselves. there is so much toxic debt to be cleared that it isnt going to go away over the course of a year or even 2. so the worst economic downturn since the great depression is over within 10 months? the history books clearly state that it took years for the economy to recover back then i dont understand why it would recover any quicker today. stocks are shooting up because of speculators which are driving the markets up it happening all around the world. a lot of companies are still writing off massive losses and thousands of people are losing their jobs still every day, i think the media is trying to put a positive spin on the ' pie' we've been given. cheap credit cheap money, the major reason for all this. cant believe a lot of places are still thinking that by spruiking more of this to try and get us out of trouble. people need to save more money, save to buy things instead of hammering their credit cards and learn to live within their means.
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