Country Report Sweden June 2009

Outlook for 2009-10

• The centre-right Alliance coalition government has made a significant recovery in the opinion polls. 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 euro for most of 2009 and 2010.

Monthly review

• Sweden will chair the EU presidency between July 1st and December 31st. Climate change, the economic recession, financial regulation, the Lisbon treaty, asylum policy and migration are likely to be key themes on the agenda.
• On June 7th Sweden will hold its fourth European Parliament elections. Of central interest is the battle between the Social Democratic Party (SAP) and the Moderate Party for the position as the biggest Swedish party.
• The government has proposed that banks and other credit institutions pay a fee to finance a stability fund that would be drawn on to cope with future financial crises.
• In May the Riksbank (the central bank) announced that it intends to restore the level of its foreign currency reserves by borrowing the equivalent of Skr100bn (US$12.9bn) in the international money and capital markets.
• Pointing to a bottoming out in the fourth quarter of 2008, the economy contracted by 0.9% quarter on quarter in the first quarter of 2009 compared with 5% in the fourth quarter, although a change in methodology lessened its decline.
• Merchandise export and import values fell sharply in the first quarter of 2009, with trade with other EU countries accounting for much of the decline. The slump also continued in April.

SOURCE: Country Report

This report covers the following industry codes:
SIC Code: 60;1
NAICS Code: 52;11