Country Report Sweden January 2009

Outlook for 2009-10

• Despite a significant narrowing in the opinion polls for the four centre-right governing parties recently, the road towards a full recovery by the next general election, scheduled for September 2010, will still be difficult.
• The government will continue to work towards tax and welfare reforms. The stability of the government is not likely to be threatened, although the public finances will go into deficit from 2009.
• The global economic downturn will continue to have a direct impact on the Swedish economy, encouraging a tightening of lending criteria and contracting domestic and external demand until at least the end of 2009.
• The Economist Intelligence Unit has lowered its GDP growth forecast to -1.2% for 2009, after growth of just 0.6% in 2008. We expect only a modest recovery to growth of 0.4% in 2010.
• The EU harmonised measure of inflation will average an estimated 3.3% in 2008, up from 1.7% a year earlier, but easing economic activity should enable it to fall to an average of 1% in 2009 and 0.9% in 2010.
• The Swedish krona will continue to weaken against the US dollar from 2009.

Monthly review

• On December 7th the Social Democratic Party-Left-Green opposition bloc announced its intention to form a joint coalition government in the event of victory in the 2010 general election.
• A Swedish commission of inquiry report into a ruling by the European Court of Justice on industrial action against a Latvian company based in Sweden could lead to a backlash in anti-EU sentiment.
• The government has announced further measures to stimulate job creation and stave off the effects of the economic downturn. The package will involve Skr28bn (US$3.6bn) in additional spending spread over 2009-11.
• On December 11th the government proposed a bail-out package for the auto industry, amounting to a total of Skr28bn in aid.
• The Riksbank (the central bank) surprised most analysts at its council meeting on December 4th by announcing a dramatic cut in the repo rateits main policy interest rateby 1.75 percentage points, reducing the rate to just 2%.
• In October industrial production declined by 6% year on year, a fall not even seen during the recession in the early 1990s, and by 1.6% month on month.
• The rate of consumer price inflation has fallen dramatically, with the annual increase in prices having slowed from 4% in October to 2.5% in November.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;37;65
NAICS Code: 52;336;53