Coronavirus: Sweden’s economy plunging despite refusal to lockdown

Unlike most countries, Sweden never locked down during the coronavirus pandemic, largely keeping businesses operating, but the economy appears to be taking a hard hit nonetheless.

Coronavirus: Sweden's economy plunging despite refusal to lockdown
An empty airport terminal in Stockholm. Photo: Jonas Ekströmer/TT

Under the Scandinavian country's controversial approach to the virus, cafes, bars, restaurants and most businesses remained open, as did schools for under-16s, with people urged to follow social distancing and hygiene guidelines.

Whatever hope there may have been that this policy would soften the economic blow now seems dashed.

“As in most of the world, there will be a record decline for the Swedish economy in Q2,” SEB bank economist Olle Holmgren said. 

'A long time'

A rebound was likely in the latter part of the year, but “we expect it to take a long time before the situation normalises,” he told AFP.

To be fair, Swedish officials insist their strategy was always aimed at public health, and never specifically at saving the economy.

The idea was to make sure hospitals could keep pace with the outbreak and protect the elderly and at-risk groups. Sweden has succeeded at the former, but admitted failure at the latter, with more than three-quarters of virus deaths occurring among nursing home residents and those receiving care at home.

READ: Ten coronavirus rules you still have to (or should) follow in Sweden

“When we have decided what measures to take to stop the virus from spreading, we have not had any economic considerations. We have followed the advice of our (public health) experts on this issue,” Finance Minister Magdalena Andersson told reporters in late May.

Still, authorities acknowledge that keeping businesses open was also part of a broader public health consideration, as high unemployment and a weak economy typically lead to poorer public health. Sweden, a country of 10.3 million, had reported 4,639 COVID-19 deaths as of Friday.

That gives it one of the world's highest virus mortality rates, with 459.3 deaths per million inhabitants — four times more than neighbouring Denmark and 10 times more than Norway, which both imposed stricter confinement measures.

At first Sweden's export-heavy economy seemed to be doing okay, with GDP actually growing by 0.1 percent in the first quarter.

But now the country is expected to follow the same path as most of Europe, with its economy shrinking for the full-year 2020 and unemployment soaring. 

Anders Tegnell has come under fire for his country's handling of the crisis. Photo: Pontus Lundahl/TT

GDP down, unemployment up 

In April, the government predicted GDP would contract by four percent in 2020, compared to its January forecast of 1.1 percent growth.

While the European Commission has forecast a Swedish contraction of 6.1 percent (compared to -6.5 percent for Germany and -7.7 percent for the eurozone), the outlook presented by the Swedish central bank is even more dire — it anticipates a GDP decline of up to 10 percent.

Some economists see Swedish growth rebounding as early as the second half of 2020, but the finance minister has warned things could get worse before they get better.

Before the crisis, Sweden's labour market was in good shape, with strong job creation and a declining unemployment rate.

Now, the government expects a jobless rate of nine percent for 2020 and 2021, compared to 6.8 percent in 2019. It sees growth of 3.5 percent in 2021. 

Export-based economy

Sweden's sharp downturn is largely explained by its dependence on exports, which account for around 50 percent of GDP. “70 percent of Swedish exports go to the EU. Shutdowns in Germany, the UK and so on are expected to hit Swedish exports considerably,” the government said.

In March, some of the country's biggest companies, such as automaker Volvo Cars and truckmaker Scania, halted production in Sweden.

This was not because of local restrictions, but because of problems with supply chains in Europe and the rest of the world. Their activities have since resumed.

Meanwhile, consumption plunged by 24.8 percent between March 11 and April 5, according to a study conducted by four University of Copenhagen economists. “Sweden is paying the same price (as Denmark) for the coronavirus pandemic.

The explanation is that when you are in a galloping crisis, consumers pull the emergency brake, whether restaurants are closed or not,” Niels Johannesen, one of the four economists, told Swedish daily Helsingborgs Dagblad.

The government in mid-March announced measures worth nearly $32 billion to help businesses.

Since then, more money has been allocated and new measures have been added, including a reduction of employers' contributions, as well as paying companies' costs for furloughed workers and sick leave.

“Given the state of government finances there is room for more expansionary fiscal policy ahead,” Olle Holmgren promised.

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Swedish bank’s IT fault puts customer accounts in the red

A technical problem at Sweden's Swedbank on Thursday night gave customers a nasty surprise, with their account balances inexplicably going negative, payments impossible, and Swish payments no longer working.

Swedish bank's IT fault puts customer accounts in the red

By 11.30pm, more than 2,000 Swedbank customers had reported the fault to the site Downdetector, and the problem was still not solved by 17.00pm on Friday. 

“We have an ongoing IT disruption where certain customers see an incorrect balance on their accounts,” a message on the bank’s app read. “The reason is a planned update to our internal systems which went wrong. We apologise, of course, for that and are working as quickly as possible to fix the problem.” 

The Swish payment service has also been affected, with the service, which is owned collectively by Swedish banks, reporting on its site that there was a “technical disruption at Swedbank and Sparbank which might affect Swish payments from these banks”. 

Some Swedbank customers posted their negative account balances on Twitter, expressing shock at the incorrect figures. 

The disruption comes at the worst possible time for many Swedes. Many people are paid on the 25th of the month, meaning this Friday marks the start of the payday weekend. Many will have also scheduled their bill payments for this Friday. 

Marko Saric from Malmö saw his account balance drop by 1.2 million kronor, going half a million kronor into the red. 

“It’s just totally crazy,” he told SVT. “We were going to go out and shop for the weekend. It’s lovely weather and the kids want to go out, but we can’t use our card. We’ve got no cash. Everything is in the bank.” 

“You’re just completely blocked. Colleagues need to make emergency food parcels for you. It’s just crazy that something like this should happen.” 

In its statement, the bank assured customers that their money was “secure”, and that the bank still had the correct information on what their account balance should be. 

“Customers who feel that they have suffered economic damage as a result of the disruption should contact the bank,” the message said.