Sweden Economic Forecast

Sweden Economic Outlook

January 29, 2019

The economy likely bounced back in the fourth quarter from a contraction in the third quarter which was driven in large part by temporary factors. The services and manufacturing PMIs were well in expansionary territory throughout the period, even though both dipped notably in December. Moreover, the economic tendency indicator signaled solid growth, while the labor market was healthy, with solid employment growth throughout the period. However, the underlying picture is still one of gradually ebbing momentum. On the political front, in mid-January a new government was formed over four months after the general elections, with incumbent Stefan Löfven, leader of the Social Democratic Party, elected prime minister after reaching a deal with the Green, Centre and Liberal parties. The move should see a more liberal economic policy, although the new administration could be politically unstable. In the previous month, parliament approved an expansionary 2019 budget presented by the opposition Moderates and Christian Democrats, which will see lower taxes and higher government spending.

Sweden Economic Growth

Looking ahead, despite slowing from previous years, growth should be solid this year thanks to healthy exports and a more expansionary fiscal stance. That said, panelists have downgraded their 2019 forecast notably in recent months, amid weaker prospects in the eurozone and with softer residential investment set to drag on activity. Elevated household debt, meanwhile, poses a downside risk to the outlook. Met the why particular panelists see GDP rising 1.7% in 2019, down 0.2 percentage points from last month’s forecast, and 1.8% in 2020.

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Sweden Facts

Bond Yield0.41-4.79 %Jan 30
Exchange Rate9.04-0.20 %Jan 30
Stock Market1,5110.14 %Jan 30

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