Higher debts hit Swedish households

While Swedes struggle to cut spending and put more money in the bank, a new survey shows that households are poorer and more indebted than at any time in recent memory.

Higher debts hit Swedish households

Swedish households lost more than 300 billion kronor ($42 billion) in the first quarter of 2008, according to the SEB bank’s Sparbarometer index, which has tracked the wealth and savings of Swedish households since 1996.

The index’s debt quotient, which measures the level of debt in relation to assets, is at the highest level ever recorded by the Sparbarometer.

“Falling stock prices and an increase in new loans has dug into households’ net worth. At the same time, housing prices haven’t kept up,” said SEB economist Gunilla Nyström to the TT news agency.

According to preliminary figures, housing prices fell 2.4 percent during the first quarter in 2008.

Swedes took 45 billion kronor out of their private savings in the first quarter, most of which went to consumption.

The second quarter’s withdrawals from investment funds amounted to 24 billion kronor, while 35 billion was placed in bank savings accounts.

“The trend from the last quarter in which households consumed their savings has now been broken,” said Nyström.

At that time, money was used to maintain people’s standard of living despite higher prices for food and fuel, as well as higher lending costs.

But now the threat of a slowing economy appears to have sunk in to Swedes’ consciousness, causing them to prepare for tougher economic times.

Taken in aggregate, however, household assets are nearly four times greater than debts.

“But there may not be many who feel that way. Many of the assets are placed in secured savings such as the corporate pension system and public pensions, in savings accounts which households can’t access,” said Nyström.

And despite the high debt quotient, 27 percent, household net worth looks good on average, according to Nyström, who suspects that the rate of indebtedness will decrease.

“A few years ago, indebtedness was increasing by more than 12 percent a year. Now that rate is down under 10 percent. But many households have poor liquidity,” she said.


Norway’s wealth fund gains 38 billion euros in first quarter

Norway's sovereign wealth fund, the world's largest, gained some 38 billion euros (380 billion kroner) in the first quarter, boosted by stock market investments, it said Wednesday.

Norway's wealth fund gains 38 billion euros in first quarter
Norway's wealth fund, which has been built up since the 1990s from the state's oil revenues.Photo by Jan-Rune Smenes Reite from Pexels

The massive fund, which has been built up since the 1990s from the state’s oil revenues, was worth a total of 11 trillion Norwegian kroner (1.1 trillion euros) at the end of March.

In the first quarter, it posted a four percent return, driven by its equity investments, which account for 73.1 percent of its portfolio and rose by 6.6 percent.

“The rise of the equity market was to a great extent driven by the finance and energy sector,” Trond Grande, the fund’s second in command, said in a statement.

The fund also made gains on its real estate investments, which account for 2.5 percent of its assets and were up 1.4 percent, while its fixed-income investments (nearly a quarter of the portfolio) suffered a 3.2 percent loss.

At the same time, the government dipped into its piggy bank to the tune of 83 billion kroner to balance its budget.

Recently the fund made its first direct investment in renewable energy infrastructure.

READ MORE: Norway wealth fund buys first renewable energy stake 

It announced it was purchasing a 50 percent stake in the world’s second-largest offshore wind farm, the Borssele 1 & 2 wind farms located off the coast of the Netherlands in the North Sea.

The 50 percent stake is being acquired from Danish firm Orsted, which will continue to own the remaining 50 percent of the project.