Population 9.48 million
GDP 520.256 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
6.1 |
3.9 |
1.3 |
1.8 |
|
Inflation (yearly average) (%)
|
1.3 |
3 |
1.1 |
0.7 |
|
Budget balance (% GDP)
|
-0.3 |
0.4 |
-0.3 |
-0.6 |
|
Current account balance (% GDP)
|
6.8 |
6.9 |
7.2 |
7.6 |
|
Public debt (% GDP)
|
42.1 |
38.4 |
38.6 |
37.2 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Open, diversified and competitive economy
- Specialisation in high-tech products and green economy
- Sound public finances
- Political consensus around the Scandinavian model
- Tax cutting programme
- Strong banking sector
- Significant net household wealth
WEAKNESSES
- High youth unemployment
- Aging population
- High household debt
Risk assessment
More or less stable growth in 2013
Household consumption, investment, public spending and exports slowed in 2012, wiping 2.6 percentage points off the growth rate. The erosion of household and business confidence throughout 2012 suggests that there will be a slight slowdown in private spending and investment, which will nevertheless remain the chief drivers of activity in 2013. Public spending will grow as will restocking. Foreign trade will make a slightly negative contribution to growth.
Modest growth in household consumption and investment supported by public spending
Despite a slight increase in their disposable income and a high savings level (nearly 10% of disposable income), households will increase their spending only slightly in 2013. The sluggish labour market and rising unemployment (8% of the active population) affecting 23% of young people will encourage households to be cautious. Falling house prices (an expected fall of 7% in 2013 after a decline of 5% in 2012) will also affect consumption negatively, all the more so as households have high debt levels (170% of disposable income). This property price adjustment follows a continuous rise (about 7.5%) on average since the start of the crisis. Despite low interest rates, residential investment is expected to grow only slightly. The deceleration in new housing starts in the second half of 2012 is a harbinger of this slowdown.
Faced with a reduction of the production capacity utilisation rate and of orders recorded in the domestic and international markets at the end of 2012, businesses will exercise caution when investing. Investment, however, receive a boost as a result of the government’s decision to devote a package of 23 billion Swedish krona (0.6% of GDP) to funding, in particular, mining infrastructures. In this context, the aim of returning to fiscal surplus in 2013 is unlikely to be achieved. However, public debt is expected to fall as a result of various privatisation projects.
Exports handicapped by slowing demand and the high Swedish krona exchange rate
Swedish exports represent half of GDP and are mainly directed to Europe (70%), with Germany, the United Kingdom, Denmark and Finland together totalling a third of these sales. Exports slowed significantly in 2012 as a result of the recession in the eurozone and the unfavourable Swedish krona exchange rate, which reached a peak against the euro in mid-2012. They will be undermined by the expected continuation of the cyclical trough in most Northern European countries in 2013. Moreover, the currency’s exchange rate will remain high and continue to adversely affect businesses’ price competitiveness, although the Swedish economy’s fundamentals continue to attract investors. In this context of a slight slowdown, the Sveriges Riksbank could cut its key rate during the year. This would result in a slight depreciation of the Swedish currency towards the end of 2013 and ease the debt-servicing burden of households with variable rate mortgages (about 60% of existing debts). But in October 2012, although the economic slowdown was already beginning to be felt, the central bank decided to prioritise the control of household debt. A fall in rates is therefore not expected in the early part of the year, unless the European economic situation worsens more than expected.
Significant increase in bankruptcies
The banking sector is robust but could be weakened, particularly by its property sector commitments. But at this stage, the house price adjustment is gradual. Access to bank credit is not expected to tighten but demand could be less sustained in a context of household and business caution. Among the exporting sectors, which will suffer most from the fall in orders and the Swedish krona’s high exchange rate, mechanical engineering, cars and chemical products will be the most affected while confidence has also declined in construction and distribution. These difficulties are reflected in the number of bankruptcies: they increased by over 18% in the third quarter of 2012, compared with the same period in 2011 and their number is over 25% higher than the one recorded before the crisis. This tendency is reflected in the slight increase in Coface’s payment incidents index, which, however, remains below the world average.
