Swedish economy posts record growth

Sweden's economy easily beat expectations to post record growth in the third quarter, driven by strong domestic demand, as the government warned against over-confidence.

The Scandinavian country’s economy, which is expected to end the year as Europe’s strongest, swelled by a much better-than-expected 2.1 percent compared to the previous three-month period, and year-on-year the growth was even steeper, at 6.9 percent, Statistics Sweden said.

The latter is the highest gross domestic product growth rate since the statistics agency began its quarterly measurements in 1970, and “is most probably the highest since 1950,” Peter Buven, an analyst with the statistics agency, told the TT news agency.

Swedish Prime Minister Fredrik Reinfeldt hailed the growth figures, which he described to TT as “very strong in an environment where many others in Europe have deep problems.”

However, he stressed the necessity of showing “humility, since Sweden is very exposed by its dependance on exports to the world around us, which is seeing a completely different kind of development.”

In light of the current Irish banking catastrophe and deepening concern about other eurozone economies, “it is difficult to estimate how long (this strong growth) will last,” he acknowledged.

Meanwhile, Buven pointed out that the strong GDP growth figures announced Monday were “of course due to the deep drop we experienced last year.”

In 2009, Sweden saw its economy shrink a full 5.3 percent, but according to Mats Dillen, the head of Sweden’s National Institute of Economic Research (NIER), the country’s GDP is now back at its pre-crisis 2008 level.

“The financial crisis is looking even deeper now than we thought before. That means things are looking even better this year, as we emerge from a negative situation and see a powerful boost upwards,” he told the TT news agency.

A few months ago, NIER forecast that Sweden would register 4.3 percent growth this year and 3.4 percent in 2011, but after seeing Monday’s statistics, Dillen said “for the current year, we will probably have to significantly revise up the expected growth.”

“We will probably see growth above five percent this year,” he said, adding that he would not yet make any new estimates for next year, since “we also need to take into consideration the international development.”

The Swedish growth figures, which already soundly beat analyst expectations in the second quarter, were again far better than expected in the July-to-September period.

According to a poll by the Dow Jones Newswires, analysts had anticipated a 1.3-percent hike compared to the second quarter and an increase of 5.6 percent compared to the third quarter of 2009.

Statistics Sweden meanwhile slightly revised down the growth numbers for the the April-to-June period, showing that Sweden’s GDP grew 4.5 percent year-on-year. Quarter-on-quarter, the number remained at 1.9 percent.

Contributing to the strong third-quarter growth, according to the statistics agency, was a 3.5-percent increase in household consumption expenditures and a 1.8-percent jump in government consumption expenditures.

Changes in inventories meanwhile alone contributed to 2.9-percent of the GDP increase, Statistics Sweden said.

Sweden, which emerged from recession in the second quarter of 2009 and saw growth quickly pick up in the first quarter of 2010, now has one of Europe’s strongest growth rates.

Like Reinfeldt, Finance Minister Anders Borg, who has been largely credited with the Scandinavian country’s dramatic turn-around, also cautioned Monday against allowing the strong growth figures to lead to “hubris.”

“We must remember that when countries explode, as we have seen in Iceland and Ireland, this has usually been preceded by extreme confidence. Things have looked good and one has been afflicted by hubris. But we will not let that happen to us,” he told reporters in Stockholm.

“It is extremely important that we keep our public finances in order,” he added.

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Strong Nordic economies face threat in 2015

Sweden and Norway's economies may have outperformed the rest of Europe since the financial crisis, but a leading bank in the region has warned that they are under threat.

Strong Nordic economies face threat in 2015
Danske Bank, which is one of the largest financial enterprises in the Nordic region, argues that falling oil prices and deflation could affect Scandinavian economies which previously managed to weather the storm of the global banking crisis much better than many of their European neighbours.
"The Nordic countries have been looking strong in recent years, with economic and financial crisis in much of Europe… However, after years of robust growth, the shine seems to be wearing a bit off," said economists led by Steen Bocian in a report from the Scandinavian bank out Thursday.
The report also noted that Finland had been hit by the recession in Russia, linked to the ongoing unrest in Ukraine.
Norway and Sweden reported economic growth of 0.7 percent and 1.3 percent respectively in 2013. Across the EU, there was an average of no growth in the same period.
But growth has slowed in recent months, with Sweden and Norway reporting 0.5 percent percent between July and September 2014 and Sweden recording 0.3 percent.
"This does not mean that there are signs of economic crisis in the two otherwise very strong economies, but growth rates are heading towards the European average and downside risks have increased," said Bocian.
In Sweden rising household debt and a complex and overpriced housing market have caused concerns for economists, while falling oil prices are having an impact on Norway.
Both currencies have weakened against the US dollar in recent months.
Danske Bank has forecast that growth will remain a challenge for Sweden in 2015.
"To reduce the risks linked to the increasing household debt, Sweden has introduced stricter rules for amortisation, which will increase savings and thereby reduce the strength of domestic demand – the main engine in the Swedish economy in recent years," said Bocian.
Denmark bucks the trend in Scandinavia, with Danske Bank reporting that the “economy seems to be slowly moving in the right direction”. 
“GDP growth was positive in Denmark in 2014 – the first year of positive growth rates since 2011. Danish house prices are increasing and consumption seems to be picking up and in the forecast period should continue to be supported by the significant drop in oil prices,” the report reads.