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FINANCIAL CRISIS

Is it time for Sweden to brace for an economic downturn?

With growth faltering nationally, and the prospect of hard Brexit and a global trade war on the horizon, is it time for Sweden to start getting ready for an economic downturn?

Is it time for Sweden to brace for an economic downturn?
Experts believe the trigger for a downturn in Sweden is likely to come from overseas. Photo: Fredrik Sandberg/TT
Ylva Hedén Westerdahl, head of forecasting at the National Institute of Economic Research, said Swedes should not think today's good times will continue forever. 
 
While external shocks like Brexit or a trade war will only hit exporters directly, indirectly they could push down house prices, destabilize financial institutions, make salary growth stagnate and cause rising unemployment. 
 
“When house prices fall, then house-owners start to feel poorer and so they cut their consumption and start to save more,” she told the TT news agency.
 
 
Another big worry for the property market is whether the large numbers of newly built houses shortly to come onto the market will be sold. 
 
“The question is how they are going to be sold,” Westerdahl said. “Overproduction means that housing investments and prices could fall even more.”
 
But banks are not as exposed to mortgages as they were in the run up to the 2007 and 2008 financial crisis. 
 
 

Ylva Hedén Westerdahl. Photo: Anders Wiklund/TT
 
John Hassler, Professor of Economics at Stockholm University's Institute for International Economic Studies, argues that households in Sweden are not generally financially overstretched. 
 
A bigger worry, he said, was commercial property owners, some of  whom could go bankrupt in a downturn. 
 
“That's the part of the loan portfolio which is a little more uncertain,” he said. 
 
If that leads to a confidence crisis in the housing sector, banks could star pulling in lending to households and other investment projects, he warned. 
 
“The blood flow in the system might ground to a halt and that's very serious.” 
 
 
If the crisis is serious enough to push any of the banks into a crisis, then that could hit the entire economy seriously, forcing the national government to come to the rescue and guarantee some banks' borrowing. 
 
Luckily, he said, Sweden's cautious fiscal policy over the past 20-25 years had left it with considerable firepower to bail out banks in the event of a crisis. 
 
“If we had the same debt levels as France or Italy we would have been toasted.”
 
 
Most economists see Sweden's next economic downturn as coming from external factors, such as a financial crisis in Sweden, a crisis in the Eurozone, or a trade war between the US and China. 
 
The first industry segments to be hit will be big exporters such as Scania and Swedish steel giant SSAB. 
 
How much their troubled hit the wider Swedish market depends on how willing they are to hold onto their staff despite drops in sales, Hassler said. 
 
“They were willing to do that during the [2007] finance crisis but not during the 1990s economic crisis, when companies realized they weren't competitive enough,” he said. 
 
If there are mass layoffs, he said, the weakest members of the workforce would be the worst affected. 
 
“It has been tough for those with a low level of edcuation or a foreign background to get a job even during an economic boom, and for them a downturn would of course be much worse.”

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ENERGY

EXPLAINED: When should I turn on my heating in Sweden this year?

Energy costs in Sweden are set to reach sky-high levels this winter, which will leave many people wondering when they should start heating their homes. Here's what you need to bear in mind.

EXPLAINED: When should I turn on my heating in Sweden this year?

What’s happening?

As a result of supply stoppages for cheap Russian gas affecting energy prices on the European market – particularly in Germany – energy prices in Sweden have been at record levels for months, especially in the two energy price zones in the south of the country.

With winter looming and no sign of things getting cheaper anytime soon, private individuals are starting to cut down on energy usage as much as they can to slash their bills this season.

Does it make a difference what type of accommodation I live in?

The right time to start heating your home depends on several factors including your own personal preference, the weather, whether you live in rented accommodation or own your own property, and on the age and features of the property you live in.

How does the heating system work in Swedish homes?

More than half of all houses and commercial properties in Sweden use district heating or fjärrvärme, with this number rising to around 90 percent for apartment buildings.

This system distributes hot water from heating plants to houses and apartments through underground water pipes, meaning that heating sources are centralised, rather than individual houses or apartments having their own heating source.

In smaller towns and in houses, district heating is less common, and it’s these households who can benefit the most from waiting longer to turn on their heating.

Do I control my heating?

It depends. If you live in a rented apartment or a bostadsrättsforening (co-operative housing association) with district heating, your landlord or the board of your housing foundation will usually decide for you when to turn your heating on.

Unlike other countries, Sweden has no official legal heating season, with heating in bostadsrättsföreningar usually switched on automatically following periods of cold weather, no matter which date they occur on.

This will usually be designed to provide an indoor temperature of around 21 degrees – you can turn your radiators down if you feel this is too warm, but you won’t usually be able to turn them up if you want the temperature to be warmer.

The Public Health Agency recommends temperatures of between 20 and 24 degrees indoors, with temperatures lower than 18 degrees in apartments posing a health risk.

Temperatures lower than 14 are not recommended as they can cause condensation and mould growth on walls and furnishings, which, again, are a health risk, and can cause permanent damage to properties.

Can I save money by waiting to turn my heating on?

Again, it depends. If you’re renting and you pay varmhyra – rent with heating included – then you won’t save money directly, but heating your home wisely could make it less likely for your landlord to raise your rent to cover increased heating costs.

If you pay kallhyra – rent without heating included, then waiting to turn on the heating will save money on your electricity bill.

Similarly, in some housing associations, electricity and heating costs are included in your monthly fee, meaning you pay your share of the heating costs for the entire building ever month. In this case, your energy costs are more affected by how much energy everyone else in your housing association uses than your individual usage.

On the other hand, this doesn’t mean you shouldn’t care about how warm your heating is – if you have your heating on full-blast for the whole winter, your costs will increase as well as the costs of all of your neighbours, and if the entire association’s energy costs increase substantially, the board may decide to raise the monthly fee or avgift for everyone in the building to cover this.

If you pay an individual energy bill based on your own household’s usage, and not on an average of the whole building, it could pay to wait before you switch on your heating.

How else can I save money on heating costs?

Turning your heating down a couple of degrees can make a big difference to your heating costs, but you can also save money on heating and make your property feel warmer by making it more energy effective.

There are a few easy ways to do this, according to the Swedish Energy Agency.

Firstly, make sure your house is well insulated, not just your doors and windows, but also in the loft: a large amount of a building’s heat escapes through the roof. This also applies to the boundaries between well-insulated and poorly-insulated areas.

If you have a cellar or conservatory, for example, which is not heated and not insulated, make sure the door between this room and the rest of the house is well-insulated with no gaps around the doorframe where heat can escape into the colder room. 

In a similar vein, locate any drafts and do what you can to block them, either with draft excluders or by replacing worn-out draft excluder strips on old doors and windows.

You can also benefit from thinking about how you furnish your home – furniture placed in front of radiators mean it is harder for warm air to circulate, and you can keep your house warmer at night by closing your curtains or blinds to keep eat from escaping through your windows.

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