Full swing in the economy – the recession lingers


Published 1 December 2022 at 08.02

Economy. The governments both before and after the election have made one thing clear: Sweden must get out of the recession. So far it's working – the recession has been postponed and the Swedish economy is going like a train.

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Measurements from the Norwegian Economic Institute, the authority tasked with predicting the mood in the economy, shows that Swedes believe in a sharp downturn and that the better-leveraged households feel they are living on borrowed time.

A crisis for the Swedish economy is thus predicted by households, but the picture does not fully match the experts' calculations. All major banks, for example, expect that the fall in house prices, which frightens households the most, can stop at a price drop of 20 to 25 percent.

The households' crisis forecast is even worse in line with reality. At the same time as households are depressed on record, the Swedish economy is moving like a train.

Housing prices are back at the levels from just before the pandemic in 2020 and in the last month the stock market has surged by 16.4 percent.

Admittedly, the temporary highs that were seen in both stock market prices and house prices during the corona crisis have fallen back. But these asset prices were due to many getting rich on one-off grant and support packages at a time when interest rates were historically low. A return to the price levels shortly before the subsidies began to be paid out is therefore not a sign of a recession.

Despite rampant inflation, the Riksbank has not adopted high – or even normal – levels of the key interest rate. Instead, the Swedish interest rate remains at 2.50 percent, a pure crisis rate that is normally used when a central bank wants to accelerate during a severe recession. But now the low interest rate guarantees nice loans and easy money even like this during the boom.

Because there is no doubt that there is still a boom in Sweden. Employment, for example, has continued to increase and during the third quarter of the year unemployment was at 7 percent according to Statistics Sweden.

Swedish unemployment has thus fallen in a more or less constant trend since the peak of 8.9 percent in the summer 2020.

That the Swedish economy is running like a train is also confirmed by the EU Commission, which in its autumn forecast predicts growth for the country of a somewhat incredible 2.9 percent in 2022.

Nordea's chief economist However, Annika Winsth tells SvD that the job figures lag behind and usually have a delay of six months. However, she does not share the households' conviction of an approaching disaster.

– The households have a very dark picture, but it is about a recession, not a crisis, so far, she tells the newspaper.

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