Sweden’s economy has contracted for the fourth consecutive quarter, as no interest rate cuts have been implemented, potentially hindering efforts to stimulate economic activity in the country.
Preliminary estimates released today (April 29) by Sweden’s National Statistical Office reveal that the seasonally adjusted gross domestic product (GDP) declined by 0.1% in the first quarter of 2024 (January-March) compared to the fourth quarter of 2023. This figure falls below economists’ forecasts, who anticipated a 0.2% growth in the Swedish economy during this period. Notably, the Swedish Central Bank, or Riksbank, had forecasted stability in the Swedish economy for the first quarter of 2024 in its March Monetary Policy Report.
Sweden has faced particular challenges due to rising borrowing costs, especially when compared to other European countries. Many households in Sweden carry significant debt burdens with fixed interest rates in the short term. Consequently, consumer spending has dwindled, and housing construction has slowed down, leading to a contraction in the Swedish economy since the second quarter of 2023.
The Riksbank is considering a policy rate cut from the current 4% at its upcoming meeting next week or potentially in June. Despite this, inflation has increased at a slower rate, prompting households to exhibit a more positive outlook. Notably, the consumer confidence gauge has surged to its highest level since February 2022.
However, additional data from the Swedish National Statistical Office indicates that retail sales still experienced a decline of 0.4% in March compared to the previous month.