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Sweden: Country Economic Forecast: 23 Feb 2012

9 Pages Oxford Economics SKU: OFE3790004

GDP is expected to have fallen sharply in 2011Q4, by 1.8%, largely due to a decline in export volumes. This is in contrast to Q3 when net exports made a substantial contribution to growth. Even so, GDP is likely to have grown 4.2% in 2011, well above the Eurozone's 1.5% expansion. Merchandise exports have continued to decline, under pressure from faltering Eurozone demand and the strong SEK. Furthermore, the jobless rate ticked up to 7.5% in Q4 and is expected to rise further in the coming months as growth remains sluggish. And although survey data have been more upbeat in the most recent months, there is little sign of a convincing upturn. As a result, we now forecast 2012 GDP growth of just 0.6%, with the risks to the downside unless the Eurozone crisis abates. On 16 February, the Riksbank lowered its key interest rate by 25bp to 1.5%, prompted by much weaker domestic and global growth expectations as well as low prospective core inflation. Moreover, we expect interest rates to be cut by a further 25bp in April, and then to be held at this low level until mid-2013. CPI inflation eased to 1.9% in January. Core inflation is forecast to remain low, held down by subdued growth, modest increases in wages and the strong SEK. We now forecast average inflation of 1.5% and 1.8% in 2012 and 2013 respectively.

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Sweden: Country Economic Forecast: 23 Feb 2012

Oxford Economics

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