The skyline in Sweden

Sweden GDP Q1 2021

Sweden: Economy grows in Q1; GDP close to pre-pandemic levels

The economy expanded 0.8% in seasonally-adjusted quarter-on-quarter terms in the first quarter of 2021, rising from the flat reading in Q4 2020 but falling slightly from the 1.1% growth estimated in the preliminary Q1 release. Meanwhile, on an annual basis, GDP declined 0.1% in Q1, softening markedly from Q4 2020’s 1.8% contraction and indicating the economy has very nearly reached its pre-pandemic levels.

The quarter-on-quarter reading reflected a broad-based improvement in domestic demand. Household spending increased 0.5% in the first quarter, which contrasted the fourth quarter’s 0.3% contraction. Elsewhere, government spending growth quickened to 0.4% in Q1 (Q4 2020: +0.1% s.a. qoq), while fixed investment dropped at a more moderate pace of 0.1% in Q1, compared to the 0.7% contraction logged in the prior quarter.

On the external front, exports of goods and services increased 1.3% on a seasonally-adjusted quarterly basis in the first quarter, which was well below the fourth quarter’s 6.4% expansion. In addition, growth in imports of goods and services softened to 1.4% in Q1 (Q4 2020: +3.6% s.a. qoq), marking the worst reading since Q2 2020. As such, the external sector was balanced in Q1, neither contributing to nor subtracting from overall growth, following Q4 2020’s 1.4 percentage-point contribution.

Looking ahead, recent data indicates an improving albeit still-muted picture in the second quarter of the year. PMIs for April showed a continued improvement in the manufacturing and services sectors, while retail sales grew at a robust pace amid surging consumer confidence. Moreover, both merchandise exports and imports increased strongly in the first month of the quarter—likely reflecting improving demand dynamics both at home and abroad—although elevated daily coronavirus infections are a cause for concern in the coming months.

Commenting on the Q1 result and the outlook, Pernilla Johansson and Maria Wallin Fredholm, analysts at Swedbank, stated:

“The [Q1] estimate was somewhat lower than the preliminary figure, but on the other hand the previous quarters were revised upwards. Compared to our and the Riksbank forecast from April, GDP reached the pre-pandemic level much faster than expected. […] We expect the better momentum in the economy to continue, and that activity picks up substantially in the coming quarters. In all, the data so far has surprised on the positive side, which puts an upside risk to our forecast of GDP growth at 3.5% for this year.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest