Sweden’s state-backed export bank is targeting emerging-market currencies including the Mexican peso, the Brazilian real and China’s renminbi to help companies in the largest Nordic economy build markets outside Europe.
“The best-functioning market is still the dollar, and then the euro is also good and functioning, but we are trying very much to borrow in other currencies that are harder to get, to offer those to export companies,” Peter Yngwe, chief executive officer of SEK, said by phone from Stockholm yesterday. “They can then, through us, get hold of these currencies, and at a relatively good cost.”
Yngwe, who also singled out the Thai baht, said SEK is targeting currencies from markets where exporters are enjoying growth. Sweden’s government is urging companies to rely less on sales to Europe, where the debt crisis is entering its fourth year, and more on markets with brighter expansion prospects. Swedish sales abroad make up half the $550 billion economy, while about 70 percent of exports go to Europe.
“We have had this strategy for quite a long time but it is particularly distinctive now as capital markets are functioning better and as companies now have a greater need for these kind of currencies than ordinary currencies,” Yngwe said.
Trade Minister Ewa Bjoerling has promoted a shift away from European markets to make Sweden less vulnerable to economic shocks. She says she wants manufacturers to target buyers in countries such as China, India and Brazil.
A 0.8 percent decline in Swedish exports led to a 0.1 percent economic contraction in the second quarter, official data showed this week. Economists surveyed by Bloomberg had predicted 0.1 percent growth.
Finance Minister Anders Borg on May 7 urged Swedish manufacturers also to target Africa, saying that his country is “in a tough neighborhood because the rest of Europe is growing very slowly.” Sweden is already “heavily diversifying our trade toward Asia, but also I think to Africa and Latin America,” he said. “We don’t want to be stuck in a low-growth Europe.”
Swedish exports dropped 3.5 percent to 1.17 trillion kronor ($178.2 billion) last year and slumped an annual 9.8 percent to 548.8 billion kronor in the first six months of 2013, according to Statistics Sweden. Of total exports in 2012, 57 percent went to countries in the European Union.
The government of Prime Minister Fredrik Reinfeldt estimates Swedish exports to Asia will jump 32 percent between 2012 and 2016 and grow 27 percent to central and South America, North Africa and the Middle East, according to information on its website. Shipments to sub-Saharan Africa are seen rising 19 percent. In contrast, exports to the EU and North America are forecast to rise 16 percent and 7 percent, respectively.
In the first half of this year, new lending at SEK rose to 38.1 billion kronor from 28.5 billion kronor in the same period a year earlier, according to information on its website. It raised 54.2 billion kronor in funding in the six months through June, more than the entire volume raised in 2012 as a whole.
At the end of last year, 36 percent of SEK’s total long-term funding was in U.S. dollars while 27 percent were in Japanese yen and 8 percent in euros. Some 6 percent were in Swiss francs, 6 percent in Australian dollars, 4 percent in British pounds and 3 percent in Swedish kronor. SEK also had 3 percent of funding in Brazilian real, according to its website.