Swedish Economy Slows Down Less than Expected


writer icon Kristine Hanson     Riksbanken   |   Investment     🕐 30. May. 2019

Since early in the year, Sweden has seen its economy grow at a surprising rate: three times that which had been estimated, according to reports.

As news of this broke on Wednesday, the Swedish krona (SEK) jumped in value. However, during the course of the day it seemingly levelled out again.

Unexpected GDP growth
The Nordic country saw its gross domestic product (GDP) grow 0.6% during the first quarter of 2019, slowing much less than expected in the year's first quarter, which in turn means that it grew at a rate of 2.1% from the year before.

The GDP growth was notably more than what both the Riksbank and leading economists had predicted.

Riksbank rate hikes
This surprising development in the country’s economy has some downsides too it seems. In light of recent, and possibly also future upcoming rate rises by the Riksbank, critique from a senior economist at the Swedish bank Handelsbanken, included such strong words of warning as: “This should send some worrying signals [to the Riksbank]".

He further added that “[w]ithout the strong economic development they are counting on, combined with rising unemployment and inflation that struggles to stick to 2%, the Riksbank will need to cancel its rate hikes,“ Bloomberg reports. But what does this mean in practice for the economy in the Nordic country?

Threats to the economy
According to a recent press release from the Riksbank, the biggest threat to the Swedish economy at time of writing is the high level of personal debt incurred as “household indebtedness”, particularly when it comes to housing mortgages that use the house as collateral.

As a result, ”households are sensitive to changes that affect their finances, such as rising interest rates, rising unemployment and falling housing prices.” A matter, which in turn, may be affected by what the Riksbank decides to do moving forward.

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