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ECONOMY

Swedes confident despite debt crisis

Swedish businesses and consumers remain confident about the prospects for the economy, despite the debt crisis in the eurozone, according to a new report.

Consumers’ confidence in the economy and in their own financial situations fell slightly in May, but remains is significantly stronger than normal, according to the National Institute for Economic Affairs (Konjunkturinstitutet).

The consumer confidence indicator, which measures Swedes’ confidence both in their personal financial situations and in the country’s position, fell 0.7 points to 18.8.

“Sentiment about the economic situation is however still significantly more positive than normal,” the institute wrote in a statement.

Confidence among businesses rose between April and May, with the manufacturing, construction and service sectors all reporting increased optimism. The retail sector reported a more negative view, with confidence falling by 7 points, mainly due to a weakened outlook for food retailers.

The overall confidence index, known as the barometer index, rose by five points.

“It still looks positive and is rising despite the trouble in Europe. It indicates that growth in the second quarter will continue to be very strong,” said Olle Holmgren, analyst at SEB.

The report also provided good news about the jobs market:

“Businesses’ are continuing to plan for increased recruitment. They are at quite high levels now. This indicates that the employment rate could accelerate,” he said.

Holmgren said concern that the eurozone debt crisis would dampen Sweden’s economic recovery was justified, but said there would be a delay before the effects were felt.

SEB expects, along with most other experts, that the Riksbank will in July raise the repo rate from its current record low of 0.25 percent. Holmgren said the new report would increase the likelihood of an interest rate rise.

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ECONOMY

Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.

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