In 2019, GDP growth slipped to 1.3%, the lowest level since 2013.
GDP Growth and inflation (Y/Y, %) The economic fallout of the Covid-19 pandemic, coupled with the slowdown already underway, will probably drive Sweden into recession in 2020, even though official forecasts are still in positive territory (+0.8% according to Magdalena Andersson, Minister for Finance).
Economic stimulus measuresDemand falters
With exports accounting for 45.6% of GDP, the Swedish economy will be hard hit be the slowdown in global trade engendered by the Covid-19 crisis. Swedish exports will decline in the first half of 2020 as demand is bogged down for its main trading partners, notably China and the European Union[1].
The Covid-19 crisis will affect corporate production chains in Sweden and aboard, resulting in a decline in private investment. For example, 90% of Swedish business leaders operating in China foresee a sharp drop in sales in 2020.
For the moment, the virus has not hit Sweden very hard (only 180 Covid-19 victims at the time we went to press, which as a share of its population is 12 times less than in Italy). It has not had to impose strict confinement measures either. Consequently, it is counting on household spending to be relatively resilient. Even so, private consumption will be squeezed by several negative factors (rising unemployment[2], higher precautionary savings), and is likely to level off at best in 2020, after rising 1.2% in 2019. Lastly, after declining by 8% in 2019, residential investment is expected to stabilise at a low level[3] thanks to the absorption of surplus house stocks for sale on the market.
