Swedish companies still struggling for funding

Swedish companies are still finding it hard to get funding on the financial markets, despite signs of economic recovery, the deputy governor of Sweden's central bank, the Riksbank has said.

Karolina Ekholm made the comments in a speech on Friday in Stockholm.

“Swedish companies have gradually found it easier to find funding on the international capital markets. But the funding situation is still strained,” she said, pointing out that interest rates offered to Swedish companies are high in comparison to interest rates for government securities.

Ekholm also argued that corporate demand for export guarantees is currently much higher than in the past.

According to Ekholm, who took office in January this year, the economy is showing signs of recovery. She said world trade had now begun to stabilize “following the collapse at the beginning of the year”.

She pointed out that the forecast for Sweden’s gross domestic product (GDP) growth has been revised upwards somewhat, after falling for five consecutive quarters.

“Furthermore, indicators for development in the third quarter, such as the purchasing managers’ index and the Economic Tendency Survey, point to the recovery coming slightly sooner than we previously believed,” she says in Friday’s speech.

“We have therefore revised our forecast for growth in 2009 upwards slightly. But the recovery will begin from a very low level. Sweden’s GDP is now expected to fall by 4.9% this year compared to last year. This is the largest decline in Swedish GDP in an individual year since 1940.”

The unemployment situation is expected to be gloomy for some time to come. “This is because the labour market can not improve as long as the companies have unutilised resources and still need to reduce their workforces.”

Ekholm voted at the last monetary policy meeting in July that the repo rate should not be cut beyond 0.25%.

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Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s.