Sweden sinks into economic recession

heavily in debt, households, very sensitive to increases in interest rates, see their purchasing power reduced and slow down their consumption, plunging the economy.

per Anne-Françoise Hverenet (Malmö (Sweden), regional correspondent)

Should we increase your monthly payments or save to cope with the rise in electricity prices? Negotiate a new loan over five years or favor a credit over three months? Choose fixed rates or variable rates? For the past few weeks, Swedish newspapers have been full of advice to answer questions from the Swedes, who are concerned about the increase in interest rates and the darkening of economic prospects.

In the fourth quarter of 2022, the gross domestic product (GDP) had already dropped by 0.6 %. Monday, February 13, the European Commission published its forecasts for 2023: Sweden is the only country in the European Union for which Brussels anticipates a contraction of the activity (-0.8 %) this year. Director of forecasts at the Institut de la conjoncture in Stockholm, Ylva Héden Westerdahl does not surprise it: “It has been six months that my superiors ask me why we do less well than other European countries which, too, are assigned by the war in Ukraine. “

m me heden westerdahl has several answers. First, the Swedish economy resisted better than that of its neighbors, during the pandemic of Covid-19: “We start from higher,” she said. In addition, Stockholm has “less used stimulation measures”. Faced with the explosion of energy prices, no price shield, but limited and retroactive aid to households living in the southern half of the country, where electricity prices are higher than in the North. Companies are still waiting.

Impact of monetary policy

But, even more, if Sweden is distinguished as much, it is because of “the impact of its monetary policy on households”, notes M ^{me her westerdahl. Because not only are Swedes are among the most indebted peoples in Europe, with cumulative debt greater than 5,000 billion crowns (450 million euros), the equivalent of Swedish GDP, and a debt rate surrounding 180 % of their disposable income, but most have a loan at variable or negotiated rate in a very short term – at most five years.}

Result: “Households are extremely sensitive to the slightest variation in interest rates”, observes Arturo Arques, economist at SWEDBANK. However, if these were previously very advantageous, they have skyrocketed, since the Riksbank, the Swedish central bank, decided to rebuild its key rate above zero in May 2022, to reach 3 % February 15 – its highest level since 2008.

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