For 2023, Swedbank’s economists are now predicting that growth will be a barely noticeable 0.2 percent, compared to previous predictions of 2.1 percent. This year’s prognosis has also been lowered from the previous prediction of 2.8 percent to 2.2 percent.
“We’re expecting a period of minor slowdown with falling GDP for a few quarters until growth improves in mid-2023,” the bank’s economists wrote in a new report.
‘Substantial risk of a hard landing’
Mattias Persson, the bank’s chief economist, predicts that consumption will decrease as inflation starts to affect consumers, and as high interest rates make loans more expensive.
“Companies will be affected by pressure on costs and the possibilities of passing those costs on to consumers will dwindle with time. Investments will be strongly affected,” he wrote in a press release.
He added that the energy crisis was expected to get worse during the winter, at the same time as central banks continued to raise interest rates during the autumn before holding off in 2023.
“A soft landing is possible, but the risk of a hard landing is substantial,” Persson wrote.
One risk he identified was that central banks reacted too strongly to push down inflation, driving the economy in to a “deep and long-term period of low growth”.
Inflation is expected to reach a top at the end of 2022, with rates expected to remain at over 3 percent for a the majority of next year, Swedbank economists said.
‘Housing prices will fall 15 percent from peak to bottom’
The Swedish central bank, the Riksbank, is expected to increase key interest rates to 2.25 percent between now and the beginning of next year.
“Companies’ high costs for transport and goods will have an impact, as will high import prices due to a weak krona,” Swedbank writes in its report.
“The pressure of inflation has broadened beyond energy and food, and the price of both goods and services are now being adjusted upwards at a rapid pace.”
On the property market, Swedbank predict continued price decreases throughout the next year.
“Overall, we expect that housing prices for the country as a whole will have fallen by around 15 percent from the peak in February to the bottom in the first half of 2023.”