The alarm: Sweden's economy is crashing – secretly

Published December 19, 2024 at 4:27 PM

Economy. Despite the Riksbank once again lowering the key interest rate, the Swedish economy refuses to take off. Andreas Cervenka, economic commentator at Aftonbladet, describes the situation as a “crash in slow motion” where growth has basically stood still for three and a half years.

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“Three and a half years without growth is more dramatic than it looks,” writes Andreas Cervenka in an analysis.

Sweden's GDP has been at the same level since mid-2021, and even with the Riksbank's cuts in the key interest rate – now to 2.5 percent – ​​the recovery looks to be both slow and weak.

Cervenka points out that there is normally a rapid recovery after a recession, but this time growth has failed to materialize.

He also highlights Sweden's high debt as a possible explanation:

“In terms of the private sector, we are one of the world's most heavily leveraged countries.”

Despite low interest rates for many years, GDP per capita has grown at modest 0.7 percent per year between 2011 and 2024. At the same time, enormous wealth has been created through rising housing prices, but this has not resulted in increased consumption.

Cervenka also criticizes Sweden's tight budget policy.

“The Swedish state has now accumulated larger financial reserves than perhaps at any time in modern Swedish history and in principle any other comparable country. So far, politicians have been very reluctant to use these to invest in order to boost long-term growth. This has made many economists in the country scratch their heads,” he writes, describing the situation as a “mental crash.”