Sweden

RGE's Q1 2010 Sweden Outlook

Sweden’s export-reliant economy, the largest of the Nordics, is in the midst of its deepest downturn since World War II. In 2008, exports accounted for more than 50% of GDP, leaving Sweden behind only Denmark in terms of export dependence among the Nordic economies. Thus, the global downturn has had a particularly harsh impact on Sweden and GDP will contract 4.5% in 2009. The economy returned to growth in mid-2009, expanding 0.3% q/q in Q2 and 0.2% q/q in Q3. The major upside risk to our forecast is a stronger‐than‐expected V‐shaped recovery in the euro area, Sweden’s main export market, as opposed to the protracted U‐shape recovery we currently envision. Downside risks include the heavy exposure of two of Sweden’s top banks to the ailing Baltic states (Estonia, Latvia and Lithuania). Such exposure has the potential to restrain domestic lending and cut into growth, although this risk has decreased. Also, a W‐shaped global recovery, while not part of our baseline scenario, cannot be completely ruled out.

Read the Q1 2010 Sweden Outlook.