Euler Hermes


Economic Outlook no. 1189-1190 |Macroeconomic, Risk and Insolvency Outlook


Sweden


Another cold snap for exports


Overview After a record recovery in 2010 (+6.3%), the Swedish economy will post a marked deceleration in 2012 for the second consecutive year. The final figure, around +1.4% after +3.8% in 2011, is again subject to revisions of quarterly growth figures, which are often significant, but it will be marked by the slowdown in foreign trade, like in late 2011. This decline in the trend in exports is likely to weigh on investment, employment and all-important household confidence, but is unlikely to last beyond the first half of 2013. Given a resilient consumption and a rather accommodating monetary policy, Swedish GDP should gradually start to pick up and post a more pronounced recovery in 2014 (+2.1%).


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The weakening of exports is the main vehicle for the slowdown in the eco- nomy, very dependent on foreign trade (50% of GDP). The 2012 perfor- mance, down markedly, owes partly to the brutal jolt in Q4 (-3.8% q/q) but also to a certain lack of dynamism over the second half of 2012, which, in light of surveys on order books, may carry over into early 2013. By weighing on imports, the moderation in domestic demand should nevertheless pave the way for a positive net contribution of foreign trade to growth (0.6 pp in 2013). The external accounts remain largely in surplus, with a current account balance at above 7% of GDP.


Household consumption should hold up, providing welcome support to growth. Less positive trends expected to last until the end of the first half of 2013 in the job market, with the unemploy- ment rate likely to exceed 8%, are likely to weigh on household confidence. However, persistently moderate inflation will bolster the rise in real wages, even though wage negotiations may result in less favorable agreements than in 2012.


Private investment will be the Swedish economy’s main handicap in 2013 (-1.5% after +4.1% in 2012). The sharp fall in activity – especially


20


exports – which has been accompa- nied by a fresh fall in the capacity utili- zation rate in late 2012 to its lowest level since 2010, and the weakening of the outlook will have a lasting negative effect on productive investment. This is all the more the case given the stabili- zation of profits in 2012 (at the macro level), which means that the overall situation for companies has deteriora- ted markedly, with a pronounced increase in insolvencies (+9%). Construction is expected to hold up, thanks to infrastructure projects and stable residential investment.


Economic policy is set to remain accommodative. This is the case with monetary policy, the Swedish central bank having already lowered its key policy rate in 2012 to 1% in December, although a recovery in the second half of 2013 may herald a slight tightening of funding conditions. Fiscal policy may also remain accommodating, especially in a pre-election year, thanks to greater room for maneuver._CB/ML


Insolvencies in number of cases


10,000 12,500 15,000 17,500 20,000 22,500 25,000


2,500 5,000 7,500


0 9 9 9 9 9 0 0 0 0 0 119753197531 Sources: SCB, Euler Hermes forecasts Insolvencies by sector 2012


Number Change* Share of total


Agriculture Industry


Construction Automotive Wholesaling Retailing


Hotels & restaurants


156 382


1,106 202 506 812 431


Transport & communic. 580 Finance & Real estate 273 Other services Total


* Jan-Nov '11 to Jan-Nov '12 Source: SCB


2,435 6,883


4.0% 2.7%


16.5% 5.8%


11.0% 9.1%


-8.9% 9.4%


-8.4% 12.0%


2.3% 5.5%


16.1% 2.9% 7.4%


11.8% 6.3% 8.4% 4.0%


35.4% 8.6% 100% 13


Country Risk Level LOW


Economic forecasts


Change over the period, unless otherwise indicated: * contribution to GDP growth ** SEK Bn


SWEDEN GDP


Consumer Spending Public Spending Investment Stocks Exports Imports


Net exports Current account


Unemployment rate Wages


Inflation


General gov. balance ** General gov. (% of GDP) Public debt (% of GDP) Nominal GDP


** forecasts * * **


Current account (% of GDP) Employment


share 2011 2012 2013 2014 100% 3.8 48% 26% 18% 1%


50% 44% 6%


2.2 1.3 6.4 0.3 7.4 6.3 0.9


250 7.1 2.1 7.6 1.2 2.6 7


0.2 38


1.3 1.4 1.4 0.9


-0.7 0.7


1.5 1.0


4.1 -1.5 0.2 1.1


0.0 -0.1 0.4


0.6


258 262 7.3 0.1 7.7 3.4 0.9


7.2 0.1 8.2 2.4 1.0


-14 -29 -0.4 -0.8 39


Sources: IHS Global Insight, Euler Hermes forecasts 39


2.1 1.8 0.8 3.2 0.0 4.4 4.1 0.5


289 7.6 0.7 8.1 2.5 1.7 -30 -0.8 38


3,500 3,562 3,648 3,797


9,887


17,378 21,219 18,732


11,626 11,315


10,436


6,645 6,733


8,799


7,433 7,930 8,237


7,649 6,160 6,784


5,792 7,274


6,298 7,638


6,958 7,600


7,600


14,611


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