Swedish Economy Powers On as Record Stimulus Nears End of Era

Sweden has consolidated its status as one of Europe’s success stories, with annual gross domestic product in the first quarter growing at three times the speed of France’s.

Scandinavia’s biggest economy expanded 0.5 percent from the fourth quarter and 4.2 percent from the previous year, according to estimates published Monday by Statistics Sweden.

Key Points:

  • GDP figures were slightly below analysts’ forecasts of 0.6 percent and 4.3 percent respectively
  • 4Q growth was revised significantly, from 1.3 percent to 1.6 percent q/q
  • On a quarterly basis: Fixed capital formation rose 2.1 percent; exports fell 1.3 percent; private spending rose 1.1 percent; public spending rose 0.5 percent
  • Full year GDP for 2015 was revised up, from 4.1 percent to 4.2 percent
  • The Swedish krona rose 0.1 percent to 9.2697 per euro as of 9:37 a.m. in Stockholm

Big Picture

Sweden’s economy has benefited from a long period of record stimulus from the central bank, which has been buying government bonds and cutting interest rates to record lows in a bid to boost inflation. The government has also raised spending to deal with an unprecedented number of asylum seekers entering the country. However, consumer confidence has been falling steadily since February, suggesting Sweden’s boom may be tapering.

Key Analyst Comments

"The overall picture is that the Swedish economy continued to expand at a healthy pace in the beginning of the year," said Torbjoern Isaksson of Nordea. "The outlook for Q2 is decent so far, while we expect growth to slow more markedly later this year."

"The strong growth continues, and it’s driven by the domestic economy, which should lead to upwards pressure on prices," said Anna Breman, an economist at Swedbank.

"The high growth that we’ve seen in the last couple of quarters was the peak, so I think we should count on significantly calmer development of the economy going forward," said Danske Bank’s Michael Grahn.


Although there are signs that Swedish GDP may have peaked, the first quarter data reinforces analysts’ view that the Riksbank is about to wind up monetary stimulus as inflation gradually heads towards the central bank’s 2 percent target. One potential spanner in the works is the performance of the krona: Appreciate too much, and a lot of the work done to lift inflation will be undone.

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