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ECONOMY

‘Sweden will be affected by the crisis’: experts

Swedish experts say Sweden won't avoid being affected by the turbulent world economy and on Sunday financial spokesperson for the Social Democrats, Tommy Waidelich, said that he wants to gather the Riksdag’s financial committee to discuss the situation.

'Sweden will be affected by the crisis': experts

“With things as they are today I think that the committee on finance should be summoned to discuss the situation. I also think that the Riksbank should attend that meeting,” Waidelich told news agency TT on Sunday.

On Friday Waidelich had said that the state of the world economy was so severe that the government should initiate talks with the opposition and that the Riksdag’s Committee on European Union Affairs should be called to attend.

Since then the developments in the United States has led to a harsher tone between the US and China and Waidelich, who is deputy chairperson of the finance committee, said on Sunday that he will now demand an extra committee meeting to discuss recent international developments.

Several Swedish financial experts also said on Sunday that they believe the international financial instability will have consequences for the Swedish economy.

Head economist at Swedish bank Swedbank, Cecilia Hermansson, told TT that Sweden can’t avoid being affected by a world economy sent rocking, despite its own healthy state finances.

“If we enter a sluggish financial development on the world markets it will affect Sweden too. What will most probably happen is that monetary policy will become less severe. The government has announced that some reforms may have to be postponed. But it doesn’t necessarily mean that all types of support for the financial market should be completely ruled out if the economic trend points downwards,” she told TT.

Thomas Pousette, head analyst at Swedish bank SBAB is certain that Sweden can expect an unstable and spasmodic financial autumn.

“These are not problems that will resolve themselves all at once. It will be a question of seeing how policy will be shaped in the affected countries, how these are received and the effects they will have. This is just the beginning of a trend that might be pretty unstable for a longer period of time,” Pousette told TT.

The announcement by the European Central Bank on Sunday that they will purchase eurozone bonds did some to stabilize the Asian markets and stave the massive drop expected after the weekend’s international financial developments.

However, Asian markets still fell early on Monday, despite assurances by the G7 group that they would act to strengthen financial stability.

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ECONOMY

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. 

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