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ECONOMY

‘Record growth’ for Sweden’s economy

Sweden's economy easily beat expectations to post record growth in the fourth quarter while 2010 as a whole turned out to be the strongest year since 1970, the national statistics agency said Tuesday.

'Record growth' for Sweden's economy

Sweden’s economy grew 1.2 percent in the fourth quarter of 2010 compared to the previous three-month period and jumped 7.3 percent year-on-year, beating analyst expectations, according to numbers from Statistics Sweden.

The 7.3-percent year-on-year quarterly jump is the highest on record since the statistics agency started recording quarterly data in 1970.

For the whole year, “GDP (gross domestic product) increased 5.5 percent compared with 2009, which is the highest increase since 1970,” the agency said in a statement.

Sweden’s GDP growth slowed compared to the third quarter, when it reached 2.1 percent, but still outstripped analyst forecasts polled by Dow Jones Newswires for a 0.9-percent quarter-on-quarter gain.

Compared to the same quarter a year earlier, growth sped up to 7.3 percent from 6.9 percent in the third quarter, easily beating analyst expectations that growth would remain a 6.9 percent in the last three months of the year.

Compared to the previous quarter, growth in the October-December period was boosted by household consumption, which was up 4.3 percent, and by investments, which were up 4.5 percent, the statistics agency said.

Sweden, which emerged from recession in the second quarter of 2009 and saw growth quickly pick up in the first quarter of 2010 — largely thanks to a rebound in exports — now has one of Europe’s strongest growth rates.

“The Swedish economy is growing across the board. The recovery is continuing with positive signals from the labour market. This means the central bank will continue to raise its (interest) rates,” Nordea Bank analyst Annika Winsth told news agency TT.

Sweden’s central bank last month hiked its key interest rate for the fifth time since July, a widely anticipated move, bringing it to 1.5 percent.

The bank explained the hike was due to continued growth in the Swedish economy and that it expected its key rate to reach 2.5 percent in 2012, up from the 2.2 percent previously expected.

The head economist of mortgage lender SBAB said Tuesday’s figures confirmed the Riksbank had taken the right monetary policy line.

“The Swedish economy is booming!” Tomas Pousette told TT.

Finance Minister Anders Borg, who has referred to the country’s economy as a “Tiger,” shared analysts’ enthusiasm but said challenges lay ahead.

“There is a substantial challenge ahead of us to manage both strong growth and low unemployment without creating imbalances,” he told TT, saying growth of 5.5 percent in 2010 had beaten the government’s expectations.

Sweden’s unemployment rate, however, rose more than expected in January to 8.2 percent from 7.4 percent in December, but is following a downward trend annually.

In a report published in January, the Organisation for Economic Co-operation and Development (OECD) also said Sweden’s economy would continue to show strong growth this year and in 2012 after emerging relatively unscathed from the global slump.

The OECD put Swedish growth at 3.9 percent this year and 3.4 percent in 2012.

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ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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