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What does Sweden’s increasing inflation rate mean for you?

Swedish inflation rates are now at their highest level since September 2008. But how may this affect foreigners living in Sweden?

swedish coins and notes
Higher inflation rates could mean less money in your wallet – especially if you're earning in a foreign currency. Photo: Fredrik Sandberg/TT

UPDATE: In November Sweden’s inflation rate continued to rise to 3.6 percent. Click HERE to read more.

Sweden’s inflation rates rose to 3.1 percent in October compared with 2.8 percent in September, according to the CPIF (Consumer Price Index with fixed interest) measurement.

The CPIF measurement, which is that used by the Swedish Central Bank, subtracts the effects from changes to mortgage rates from the CPI (Consumer Price Index) measurement.

Excluding the effect of rising energy prices on inflation, CPIF inflation in October stood at 1.8 percent, compared with 1.5 percent in September.

But how will this affect you?

What does higher inflation mean?

Inflation means that the price of goods is increasing. It can become an issue if wages don’t rise at the same speed, as salaries have to stretch further. This leads to the real value of wages decreasing, so consumers end up with less money in their wallets.

What does this mean for foreigners in Sweden?

Andreas Wallström, Swedbank’s head of forecasting and deputy head of macro research, believes that those living in Sweden who are employed by a Swedish company will “most likely” be affected by rising inflation rates “to the same extent as Swedes”.

“I can’t see that foreigners living in Sweden would have particularly different consumption habits to average Swedes, they most likely have a home where they’re paying for rising energy prices, probably also – to the same extent as Swedes – transport prices, rising fuel costs,” he told The Local. Their Swedish salaries would also most likely rise in line with Swedish inflation rates.

However, those living in Sweden who are receiving their income from another country may notice a difference.

“If you have high inflation in one country, but income in another country, where inflation isn’t so high, you might lose purchasing power, that is to say that your true income would actually decrease,” said Wallström.

Those working for employers in other European countries will probably be unaffected, but those earning in US dollars, for example, could notice a difference.

“If you look at Europe at the moment, the way in which the inflation rate is developing looks similar in a lot of countries – more or less in Europe, on average, inflation this autumn is at around 3 percent, which is the same as in Sweden. The USA is sticking out, though, where it’s noticeably higher, more than twice as high than here in Sweden,” Wallström continued.

Could this result in a stronger Swedish krona? Photo: Sofia Sabel/imagebank.sweden.se

What could the knock-on effects of this be?

Rising inflation levels, if they continue, could also result in the Swedish krona’s value increasing.

“If inflation stays high, then the Swedish Central Bank might tighten up their monetary policy a little bit faster than the ECB [European Central Bank] will in Europe, for example. Then that could be a reason for the krona increasing in value slightly in the future, which could benefit people living abroad with their income in Swedish kronor,” explained Wallström. Conversely, this could be bad news for those living in Sweden and earning in other currencies, as their salary, when converted into Swedish kronor, would be worth less.

This could be good news for companies working with imports, on the other hand, although Wallström warns not to get too excited about this: “If the krona gets stronger, then it would absolutely be good news for import companies. That said, though, there aren’t many right now who think the krona is going to get much stronger – most analysts, including us, think that the krona will get a little bit stronger, but not a lot. We don’t really think that the Swedish Central Bank will raise interest rates much more than the ECB will, rather they’ll stay low.”

Should I be worried about rising inflation rates?

Probably not, thinks Wallström, unless inflation in the USA starts to affect Sweden.

“I don’t think so, at least not in Europe generally – I think maybe what’s happening with inflation in the USA sticks out as more worrying, and I think it could be more long-term. And the effect which that could have on Sweden is that if American inflation stays high, then maybe the American Central Bank could raise interest rates earlier, and by more than expected – which could lead to higher interest rates globally, which could lead to higher interest rates in Sweden, which could weaken house prices in the future.”

High energy prices are one reason for the recent rise in inflation rates. Photo: Janerik Henriksson/TT

What is causing it?

Wallström believes there’s a good explanation for current high inflation rates, especially when comparing the rates year-on-year – energy prices. But they won’t cause inflation to keep rising as long as they stay high but don’t increase further.

“Around half of inflation is energy prices, and what we know is, even if electricity and fuel prices in spring are still high, inflation is the difference in energy prices from one year to the next, so high electricity prices won’t contribute that much to inflation in the future, even if they’re still high,” he explained.

This also means that if fuel and energy prices decrease next year, we could see inflation rates fall again.

“We can’t rule out the fact that energy prices could even decrease somewhat, economic growth could slow down somewhat, and then we could end up seeing inflation fall because of energy prices. Energy prices are often very volatile,” Wallström said.

He added that it was a good sign that it was mainly energy prices which were increasing year-on-year, “so as long as we don’t get a very wide spread of inflation – that a lot of goods and services see rising prices, which I don’t see many signs of in Sweden or Europe in general”.

In the past month, other goods and services that have seen a price increase include food and drinks, and cultural services and goods such as package holidays, tickets to sports and cultural events, and ski equipment, according to a report from Statistics Sweden, which suggests that these price increases may be due to the easing of pandemic restrictions.

“We noted a broad price increase on recreational and cultural services such as sports competitions, cinemas, theatres and admission fees to dance clubs. This development may be related to eased restrictions,” said Sofie Öhman, statistician at Statistics Sweden, in a statement.

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What happens if you don’t pay a bill in Sweden?

Sweden's Enforcement Authority is responsible for collecting unpaid debts, fines, and declarations of bankruptcy. So, what happens if an unpaid bill reaches the Enforcement Authority, and can you do anything if you have a black mark on your record?

What happens if you don't pay a bill in Sweden?

What happens when you have a bill?

Usually, if you have a bill in Sweden, you will receive an invoice (faktura) either digitally or via post, which will include details such as the amount owed, who to pay and the date payment is due (förfallodatum).

If you don’t pay the invoice in time, the person you owe money to may turn the case over to inkasso, or a debt collection agency, who will again send you an invoice for payment, plus the agency’s fee.

If this invoice goes unpaid, the Enforcement Authority will get involved.

The Swedish Enforcement Authority, Kronofogden in Swedish, is responsible for collecting unpaid debts. It does this by providing advice and support to those who are unable to pay their debts, as well as helping creditors – such as, for example, landlords whose tenants have not paid their rent.

The debt collection agency will pass unpaid bills on to them, and you may receive a betalningsanmärkning or black mark on your credit record.

Before you receive a black mark, however, you will first receive an ansökan om betalningsföreläggande from the Enforcement Authority. If you pay this in time, your debt will not be registered as a betalningsanmärkning.

There are some types of payment where you can receive a betalningsanmärkning without the bill going through a debt collection agency first. These are usually payments owed to the state, such as unpaid tax, unpaid student loan repayments or unpaid municipal parking fees.

You are unlikely to come into contact with the Enforcement Authority unless you miss or forget to pay a bill.

What happens if you get a black mark?

A black mark can have pretty major consequences – it can stop you from hiring a car, getting a credit card, borrowing money (including getting a mortgage), taking out a phone contract or even renting an apartment, as well as barring you from ordering anything on credit or paying via invoice.

This is due to the fact that whenever you apply for a loan or credit in Sweden, the lender will check your credit score (kreditupplysning) to see if there is any risk of you not paying up. Many lenders have a strict policy on not lending to individuals with black marks on their credit score to minimise risk, no matter whether the mark is due to an unpaid phone bill or a missed mortgage repayment.

How can I check if I have one?

You can check if you have a black mark by contacting a credit check company – here is a list of all credit check companies in Sweden. Some may charge a small fee for the service, whereas others offer it for free.

One advantage of checking your own credit score before contacting a lender is that your credit score is not affected when you carry out a check on yourself. 

If, however, a bank carries out a credit check on you, this can affect your credit score – it’s usually not an issue if you carry out one or two checks, but a lot of checks in a short period of time could cause issues.

Can you do anything to remove it?

Unfortunately, no. 

All you can do is wait – a black mark will disappear from your record after three years for private individuals or five years for businesses. 

The best strategy is to avoid getting a black mark on your record in the first place – such as by paying your bills via autogiro (direct debit), keeping an eye on your post (as well as your digital post), and paying for items up-front if possible to avoid invoices, rather than using “buy now, pay later” credit services such as Klarna or Clearpay.

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