Swedish Prime Minister Sees Risk to Economy on Weak ExportsNiklas Magnusson
Sweden’s Prime Minister Fredrik Reinfeldt said there’s a risk that weak exports will continue to hold back growth after a report showed yesterday that the largest Nordic economy expanded less than forecast.
“What is weighing on us is very clearly the export numbers,” Reinfeldt told reporters in Stockholm today. Domestic consumption continues to be “strong” he said, in part buoyed by tax cuts pushed through by his administration.
Sweden’s krona sank as much as 0.6 percent against the euro yesterday after the statistics agency said gross domestic product expanded just 0.2 percent last quarter, one third the pace estimated in a Bloomberg survey. Sweden’s $550 billion economy relies on exports for half its growth, with about 70 percent of those destined for Europe.
Exporters have blamed the central bank for not doing enough to weaken the krona. Sweden’s currency is about 21 percent overvalued against the dollar and 18 percent too expensive versus the euro, according to a purchasing power parity gauge calculated by the Organization for Economic Cooperation and Development.
“It is a hard global competition that Swedish industry and other export companies are living with,” Reinfeldt, who faces a general election on Sept. 14, said. “It’s about other countries’ demand for Swedish products. We have continuously highlighted the downside risks regarding exports and foreign trade as demand around us isn’t growing as many would hope.”
The krona slipped 0.1 percent against the euro to trade at 9.2285 as of 12:13 p.m. in Stockholm.
The central bank earlier this month cut its main repo rate by a bigger-than-estimated half point to 0.25 percent in an effort to bring inflation closer to its 2 percent target. That move helped weaken the krona, which has lost about 6 percent against the euro this year.
“Of course, the krona has shifted in value in a direction that export companies should find desirable,” Reinfeldt said.
Sweden’s economy has outgrown Europe on average since the debt crisis hit half a decade ago as consumers enjoy rising wages and wealth amid cheap credit. Still, weak exports have contributed to making Sweden’s jobless rate the highest in Scandinavia. Unemployment rose to 9.2 percent in June, its highest level in three years. Consumer prices have declined for five of the past six months, on an annual basis.
Reinfeldt said plans by the Social Democrat-led opposition to raise taxes risked hampering Sweden’s economic growth.
It’s “very important that we, as we enter an election, maintain the improvements we have made and that we don’t, as proposed by opposition parties, increase burdens on Swedish industry and export companies.”