Country Report Sweden March 2009

Summary

Despite a stronger showing in opinion polls for the four centre-right governing parties in recent months, the road towards a full recovery by the next general election, scheduled for September 2010, will still be difficult.
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.
Sweden is heading in 2009 for its most severe economic contraction in decades. A tightening of lending criteria and contracting domestic and external demand will last until at least the end of 2009.
The Economist Intelligence Unit has lowered its real GDP forecast for 2009 to -3.5%, after a fall of 0.5% in 2008. We expect only a modest recovery to begin during 2010, with growth of just 0.1% forecast.
As a result of easing economic activity, the EU harmonised measure of inflation is expected to fall from an average of 3.3% in 2008 to 0.6% in 2009, followed by a slight rise to 1% in 2010.
The Swedish krona will continue to weaken against the US dollar for most of 2009, before gradually making a moderate recovery.

In February the governing coalition parties announced an agreement to reverse Sweden's long-established policy of running down existing nuclear power plants.
The car manufacturer Saab has been granted court protection against its creditors pending a restructuring of the business. The government has refused to take over the company.
Vattenfall, the state-owned power company, agreed to pay 8.5bn for the non-grid business of Nuon, a Dutch electricity provider, in late February. The acquisition will create Europe's biggest provider of offshore wind energy.
The economy contracted dramatically in the fourth quarter of 2008, by a stark 2.4% quarter on quarter and 4.4% year on year, as exports, private consumption and stockbuilding were hit particularly badly.
All four of Sweden's largest banks reported falls in profits in the fourth quarter of 2008, although they remained in the black. There is increasing concern over some banks' exposure to the Baltic states.
Labour market conditions have begun to worsen, although so far the impact has been relatively modest. In January 2009 the unemployment rate (national measure) increased to 6.7%, compared with 5.9% one year earlier.

This report covers the following industry codes:
SIC Code: 37;49
NAICS Code: 336;22