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Recession looms as Sweden's economy shrinks more than expected

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Recession looms as Sweden's economy shrinks more than expected
Household consumption fell in Sweden in the final quarter of last year. Photo: Henrik Montgomery/TT

The Swedish economy shrank more than initially estimated in the last quarter of 2022, new statistics showed on Tuesday, with a recession looking increasingly inevitable.


Swedish GDP fell by 0.9 percent, more than the 0.6 percent published in preliminary estimates in early February, according to national number-crunchers Statistics Sweden.

“The decline is being felt in many parts of the economy, with broad declines in business investment and household consumption,” said Jessica Engdahl, head of section at Statistics Sweden’s National Accounts Department, in a statement.

The Swedish economy grew by 2.4 percent in the full year of 2022.


A recession is defined as two consecutive quarterly declines in GDP, which Sweden has not yet had. But with experts predicting a gloomy outlook for the economy, it would be surprising if Sweden did not enter a recession at the end of the first quarter of 2023.


Banking giant SEB predicts that GDP this quarter will fall 0.7 percent and that the downturn will continue in the second and third quarter.

More than 15,000 people have been warned of layoffs in February, which compares to 1,400 the same month last year. Swedish employment law means most employers have to notify employees their jobs could be at risk before they are actually let go, so not all of those people will necessarily lose their jobs.

But experts generally seem to believe that although Sweden is heading for a downturn, it will be able to climb back reasonably fast.

The Statistics Sweden data also showed that the total number of employed people increased by 0.3 percent in the fourth quarter. And the overall economic trend in the rest of Europe is better than feared, which should also protect Sweden from as massive layoffs and bankruptcies as it might otherwise see.

Neighbouring Finland entered a recession in the final quarter of 2022 with a 0.6 percent GDP dip, reported the AFP news agency on Tuesday. Its economy has, like Sweden, suffered from accelerating inflation as well as the economic consequences of the war in Ukraine.


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