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Eco Perspectives

Sweden: After the recession, a slightly better outlook
02/01/2024 • By Anis BENSAIDANI

The combination of rising inflation and the monetary tightening to combat it led the Swedish economy into recession. Declining household consumption and residential investment were the main drivers. Although the situation is not expected to deteriorate further in 2024, this does not mean that a dynamic recovery is to be expected. However, although Sweden is experiencing significant difficulties, it still has many assets to support activity in the medium term.

Eco Perspectives

Could its institutions grind to a halt?

09/29/2022 •

After eight years in opposition, the conservatives have returned to power in Sweden in rather unfavourable circumstances. Although economic activity has proved resilient so far, it is showing clear signs of a slowdown. And faced with rising inflation, the population is demanding more support from the state authorities. Furthermore, the government will quickly need to adopt a position on the NATO accession process before assuming the presidency of the European Union from 1 January 2023. The difficulty will be managing to form a coalition government spanning the Liberals (on the centre-right) to the Sweden Democrats (far-right).

Eco Flash

Can populist forces take power in Sweden?

09/08/2022 •

Cradle of social democracy, Sweden is facing a possible breakthrough of the far right. Only 12 years after entering Parliament, with only 5.7% of the vote, the Sweden Democrats (SD, far right) now threaten traditional political forces. After a campaign marked by debates on crime in Sweden, on 11 September, the current government coalition led by the Swedish Social Democratic Party could fail to secure a third consecutive term, following on from its wins in 2014 and 2018

Eco Perspectives

Green protection
04/14/2022 • By Jean-Luc PROUTAT

Sweden has bet heavily on renewable energy sources, a strategy that is now paying off at a time when oil and gas prices are soaring. Although accelerating, Sweden’s inflation rate is still one of the lowest in Europe, at a little more than 4%. For Swedish households, the resulting loss of purchasing power has been mild, and partially offset by government support measures. But that is not the biggest worry: by invading Ukraine, Russia has shifted Swedish public opinion and rekindled the debate about joining NATO.

Eco Perspectives

Returning to normal
10/05/2021 • By Jean-Luc PROUTAT

Initially tempted to experiment with herd immunity to combat Covid-19, the Scandinavian country with the highest number of Covid-related deaths has largely converted to vaccinations, and the economy is on its way to returning to normal. Sweden is taking advantage of its specialisation in machinery and transport equipment, for which there is currently strong global demand. Dynamic exports are boosting corporate investment. As the Riksbank prepares to end its securities purchasing policy, the Swedish government is trying to avoid withdrawing its fiscal support too abruptly. 

Charts of the Week

Sweden: poised for a very strong rebound in GDP growth
06/01/2021 •

In Sweden, the economy continued to rebound in the first quarter with GDP up 0.8% q/q, driven primarily by exports, inventory building and an upturn in household consumption. On a year-on-year basis, growth is about to swing into positive territory (-0.1% y/y in Q1 2021). Confidence surveys suggest that the recovery is only just beginning. According to the European Commission, the business climate in industry has surged over the past two months to a record high since the creation of the survey in 1996. It also improved strongly in services. Consumer confidence has also picked up, albeit not quite as robustly

Eco Perspectives

The health situation is still fragile

04/08/2021 •

After a second, particularly long and severe wave of Covid 19 in late 2020, Sweden has been dealing with a third wave of the pandemic since mid-February. Although the vaccination campaign is unfolding satisfactorily, the resurgence of the pandemic risks pushing back the expected profile of the recovery. Monetary and fiscal policy will remain accommodating as long as necessary.

Eco Perspectives

A hard-hit economy

12/16/2020 • By Jean-Luc PROUTAT

Since March 2020, Sweden has adopted a more relaxed approach to the COVID19 outbreak as no lockdown has been imposed to the population. However, the recent pick up in new infections could slow the recovery down in Q4 2020. Pervasive uncertainty will continue to hamper exports and corporate investment, while household consumption is fuelling the economic recovery. In 2021, the Riksbank will maintain and expand its vast asset purchasing programme. New expansionist measures are expected to bolster an already accommodating fiscal policy. 

Eco Perspectives

A less severe lockdown, but a vulnerable economy

07/14/2020 •

At first sight, Sweden ranks among the countries best positioned to face the global economic crisis triggered by the Covid-19 pandemic. The government’s restrictive measures were not as stringent as in most other developed countries (shops and restaurants remained open, for example), the Swedish economy does not have much exposure to the hardest hit sectors, and the authorities have comfortable policy leeway. Yet the country also presents some vulnerabilities that make us less optimistic about its capacity to rebound. Among those are its dependence on global trade and households’ financial situation.

Eco Perspectives

Resilient but not off the hook
04/07/2020 • By Jean-Luc PROUTAT

After the economic slowdown was confirmed in 2019, the global shock of the coronavirus pandemic will probably drive Sweden into recession in 2020. The evaporation of global demand, notably from the European Union and China, will trigger a drop-off in exports, and production channels will temporarily freeze up. Investment and consumption will both be hit. The central bank has adopted unprecedented support measures while the government is devoting its financial manoeuvring room to funding a fiscal stimulus policy that supports jobs and businesses.

Eco Perspectives

Growth continues to slow
01/23/2020 • By Jean-Luc PROUTAT

GDP growth slowed sharply in 2019, and this trend is expected to be confirmed in 2020. Uncertainty surrounding the business climate and international trade are straining exports and investment. Consumption is barely rising and is unlikely to revitalize growth. Despite this environment, and with inflation near the central bank’s 2% target rate, the Riksbank opted to raise its key policy rate from -0.25% to 0%. Even so, monetary policy is still accommodating.

Sweden is a constitutional monarchy with a a Prime Minister and a monarch. Sweden is one of the wealthiest economies in Europe, with a GDP per capita in purchasing power parity around 20% above the European Union average. Sweden’s export-based economy – exports are equivalent to more than 45% of GDP. Important sectors of Sweden’s economy are public administration, defence, education, human health and social work activities, industry and wholesale and retail trade, transport, accommodation and food services. Intra-EU trade accounts for 52% of Sweden’s exports (mostly towards Germany, Denmark and Finland), 68% of its imports.

The consensus-approach to labour market relations is the main pillar of the country’s economic model. This is characterised by centralised wage negotiations, high taxes and an advanced welfare system.

Manufacturing, which accounts for around 15% of gross value added, is a key sector. The country has a competitive advantage in green technologies. Indeed, Sweden, like other Nordic countries, has long been committed to sustainable development and is now one of the OECD countries with the lowest greenhouse gas emissions per capita. Environmental objectives are increasingly integral to every policy area.

While Sweden is part of the European Union, it has not adopted the euro so the country has an independent monetary policy. Looking at risks, elevated house and rent prices, as well as household indebtedness, remain a key challenge for the economy.