Sweden’s economy managed to narrowly evade a recession in the first quarter even as inflation and higher borrowing costs weigh on the biggest Nordic economy.
(Bloomberg) — Sweden’s economy managed to narrowly evade a recession in the first quarter even as inflation and higher borrowing costs weigh on the biggest Nordic economy.
First-quarter gross domestic product, adjusted for seasonal swings, grew 0.2% from the previous three-month period when it had contracted 0.5%, according to data from Statistics Sweden. That means Sweden dodged a technical recession, defined as two consecutive quarters of declining gross domestic product.
The outcome compares with a median estimate of no change in a Bloomberg survey of economists, while the Riksbank expected a 0.3% gain.
The largest Nordic economy is beset by underlying inflation that clings to near-record levels despite the Riksbank’s monetary tightening that’s taken the key rate to 3.5% from zero within a year. That’s squeezing consumers and weighing on industries from retail and services to construction.
“The Swedish economy is still quite resilient,” Swedbank AB’s analyst Maria Wallin Fredholm said in a note to clients.
The data release is light on detail, leaving analysts to piece together where growth is coming from using various other sources of information.
“The monthly household consumption indicator together with card data from Swedbank Pay indicate that household consumption continues to weaken so the positive contributors must come from other sectors,” Wallin Fredholm said. “Likely from net exports as goods exports data (from yesterday) indicated that external demand is still holding up well.”
Read More: Riksbank Hits Economy With Half-Point Hike to Tame Prices
Sweden, which is enduring one of deepest housing slumps globally after outsized gains during the pandemic, is set to undergo the worst GDP contraction in the European Union this year, according to OECD forecasts.
There’s little to cheer about over the next two years: the central bank projects a 0.5% decline in economic output in 2023 before 0.2% growth next year, and economists at Swedbank AB this week said Sweden faces “two tough years.”
Elsewhere in the Nordic region, Finland already fell into recession in the second half of 2022, while both Norway and Denmark are likely to steer clear of full-year declines, helped by their fossil-fuel and pharmaceuticals’ sectors, respectively.
–With assistance from Joel Rinneby.
(Updates with analyst comment in fifth paragraph.)
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