Country Report Sweden July 2009

Outlook for 2009-10

• The centre-right Alliance coalition government has made a significant recovery in the opinion polls in the last year. However, the general election, scheduled for September 2010, remains too close to call.
• The government will focus on responding to the economic downturn, but will also continue to work towards tax and welfare reforms. The public finances will go into deficit from 2009.
• Following its descent into recession during the second half of 2008, the economy is heading in 2009 for its most severe decline in decades. Both domestic and external demand will experience sharp falls.
• The Economist Intelligence Unit forecasts real GDP for 2009 to contract by 5.5%, after a fall of 0.4% in 2008. We expect only a modest recovery to begin during the latter part of 2010, and the economy to grow by just 0.2%.
• We expect the annual inflation rate (national measure) to fall to -0.5% (1.2% according to the EU harmonised measure) in 2009, from 3.5% (3.3%) in 2008. Inflation of 0.8% (1.1%) is forecast for 2010.
• The Swedish krona will remain weak against the US dollar and the euro for most of 2009 and 2010. There is also a risk of further falls before it recovers.

Monthly review

• Sweden's two leading political parties, the Moderate Party and the Social Democratic Party (SAP), performed disappointingly in the June 6th European Parliament elections.
• Several anti-establishment parties contested the election, but only the Pirate Party (Piratpartiet) had any notable success, gaining 7.1% of the vote and one seat. Nonetheless, the implications of its success should not be overstated.
• The Swedish National Debt Office (NDO) has increased its forecasts for the budget deficit for both 2009 and 2010, mainly to account for the much higher level of on-lending to the Riksbank (the central bank) and to Iceland.
• In June the carmaker General Motors (GM) announced the sale of its Swedish operation, Saab, to the Koenigsegg consortium. The sale comes after months of concern and speculation over Saab's future.
• In May the jobless total increased to 446,000 or 9% of the labour force. The unemployment rate amongst younger people (aged 15-24) rose to 30%, partly owing to an increase in full-time students looking for work.
• The Swedish krona has come under further pressure on the foreign-exchange markets as concerns have risen over the plight of the Baltic states and the exposure of Swedish banks to those markets.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;60;49;39;53;70;48;2834;80;20;10
NAICS Code: 336;52;22;31;44;72;517;3254;62;311;212