Country Report Sweden September 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 experiencing its most severe decline in decades in 2009. Both domestic and external demand are seeing sharp falls.
• The Economist Intelligence Unit forecasts real GDP for 2009 to contract by 4.7%, after a fall of 0.4% in 2008. We expect a modest recovery to begin in the second half of 2009, with the economy to grow by a mere 0.6% in 2010.
• We expect the annual inflation rate (national measure) to fall to -0.5% (1.8% 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

• The summer has been quiet in Swedish politics, but the coming months will be particularly intense. The Alliance government's 2010 budget will be presented to parliament on September 21st.
• An article in a leading tabloid newspaper, Aftonbladet, caused a diplomatic row with Israel. Given Sweden's current presidency of the EU, the affair could prove untimely, yet it is likely to blow over gradually.
• The sale by General Motors (GM) of Saab Automobile hangs on Swedish government loan guarantees, but the government has rejected a request for further financial assistance.
• In a surprise move in mid-August, Swedbank announced plans for a large rights issue aimed at further strengthening its capital base. The new issue is intended to raise a further Skr15bn (US$2.1bn) from shareholders.
• The economy did not contract any further in the second quarter of 2009 in comparison with the preceding quarter. Moreover, the outlook for the second half of the year appears a little more promising.
• The number of corporate bankruptcies continued to grow in July, with 480 new liquidations being reported for the month, mainly in manufacturing, transport and services. This is 131 more than in the same month of 2008.

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