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The Swedish Economy - December 22, 2011

22-12-2011 12:09

The Swedish economy faces great uncertainty in 2012 – but not all is doom and gloom

  • This fall’s growing pessimism has moderated in the last month on the heels of slightly less negative economic signals. Short-term indicators continue to point to a slowdown, but there were also signs it could be easing. The domestic economy, including retail sales and housing construction, is facing an uphill battle, and household confidence has waned. At the same time Swedish companies are in good position and remain competitive. There are also signs that declining confidence is now bottoming out.

  • The Riksbank decided to cut its repo rate from 2.0% to 1.75%, while at the same time lowering the repo-rate path for 2012. The growth forecast was revised downward, but only marginally. As a result, the Riksbank differs significantly from the more negative view of the Ministry of Finance. The government's budget is still robust, however, and is expected to produce a surplus in 2011. With a relatively high policy benchmark rate compared with other countries and strong public finances, Sweden has considerable room to utilize policy measures to stabilize its economy, in contrast with most other European nations. 

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