Sweden Economic Forecast

Sweden Economic Outlook

December 20, 2018

The economy shrank in the third quarter according to recent figures, although this was due in large part to temporary factors. Lower vehicle sales—following tax changes which caused a front-loading of sales in the second quarter—depressed private consumption, while inventories subtracted notably from GDP. In contrast, fixed investment rose strongly, while the external sector strengthened. The underlying picture was one of an economy still in good health, but losing momentum compared to the high growth observed in previous quarters. The economy should have rebounded in the fourth quarter, and available indicators for the period point to fairly robust activity. Both the services and manufacturing PMIs were comfortably in expansionary territory in November thanks to solid growth in new orders, while in December the economic tendency indicator remained well above the neutral 100 mark. On the political front, the country is still without a government following the general election over three months ago. On 14 December, parliament voted against Social Democrat leader and caretaker Prime Minister Stefan Löfven becoming prime minister, a few weeks after Annie Lööf—leader of the Centre Party—abandoned her attempt to form a government.

Sweden Economic Growth

Looking ahead, despite slowing from previous years, growth should be fairly strong, thanks to fixed investment and exports. However, weaker residential investment will drag on activity. Elevated household debt, meanwhile, poses a downside risk to the outlook. FocusEconomics panelists see GDP rising 1.9% in 2019, down 0.2 percentage points from last month’s forecast, and 1.9% again in 2020.

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Sweden Facts

Bond Yield0.41-4.79 %Jan 14
Exchange Rate8.95-0.20 %Jan 14
Stock Market1,4580.14 %Jan 14

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