Sweden Country Risk Report Q4 2017
Sweden will remain a growth outperformer among developed states,but the economy is set to cool slightly from well-above trend levels.
The surge in migrant inflows in 2015-2016 will lead to higher economicgrowth over the medium term, but will present challenges tothe fiscal accounts, the labour market and domestic political stability.
The Swedish political scene is splintering and new realignmentslook likely following the 2018 general election. The uncertainty overfuture policy formation will continue to weigh on BMI's political riskscore for the country.
Interest rates will remain low through 2018 as the central bank (Riksbank)will maintain a negative policy rate and inflation will continueto surprise to the downside.
Major Forecast Changes
We have raised our already-above consensus forecast for real GDPgrowth in 2017 to 3.1% from 2.8%, though we maintain our 2.5%projection for 2018.
We have lowered our short-term political risk score to 86.5 from 89.0,due to increased policy uncertainty a year ahead of the September2018 legislative elections.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Domestic Demand Boom To Fade
- The surge in Swedish economic activity in H117 has led us to revise up our growth forecasts. However, we believe that two of the
- driving forces behind the recent strength in domestic demand, household consumption and residential construction, are set to slow.
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Outlook On External Position
- TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
- TABLE: CURRENT ACCOUNT BALANCE FORECASTS
- TABLE: TOP 5 EXPORT DESTINATIONS AND GOODS EXPORTS
- TABLE: TOP 5 IMPORT SOURCES AND GOODS IMPORTS
- Monetary Policy
- New Inflation Target, But Same Policy Outlook
- The Swedish Riksbank is likely to change its inflation targeting regime in September, but we believe the near-term impact on
- monetary policy will be limited. We remain below-consensus on rate hikes in 2018-2019 as the Riksbank is likely to remain cautious of
- overtightening following years of undershooting its inflation target.
- Monetary Policy Framework
- TABLE: MONETARY POLICY FORECASTS
- Structural Fiscal Position
- TABLE: GENERAL GOVERNMENT EXPENDITURE AND REVENUE BREAKDOWN
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- Chapter 2: 10-Year Forecast
- The Swedish Economy To 2026
- Well Positioned For The Long Term
- Sweden is among the most strategically well-positioned economies in the developed world and this is reflected in our 10-year growth
- forecasts, which expect steady expansion through to 2026. The balance of payments will remain stable, buoyed by a robust current
- account surplus, some of the best fiscal dynamics in Europe, and a highly productive workforce over the long term.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Mainstream Party Failures Increase Policy Uncertainty
- Sweden's two largest mainstream political parties are in trouble, which opens the door to a strong performance by the anti-immigration
- Sweden Democrats in the 2018 elections. This suggests heightened policy uncertainty ahead, as the Sweden Democrats are likely to
- have an unprecedented amount of sway over legislation.
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Strong Institutions Underpin Stability
- With a long-term political risk score of 93.7 (out of 100), Sweden is among the most structurally stable countries in the world. Benefiting
- from an advanced level of institutional development, a long history of democratic governance and an established foreign policy based
- on neutrality, the country faces limited underlying risks to political stability over the long term. However, the rise of a populist antiimmigration
- movement amid a quickly growing foreign-born population poses risks to both governance and Swedish civil society.
- Chapter 4: Operational Risk
- Operational Risk
- TABLE: DEVELOPED STATES – LABOUR MARKET RISK INDEX
- TABLE: DEVELOPED STATES – LOGISTICS RISK INDEX
- TABLE: DEVELOPED STATES – CRIME AND SECURITY RISK INDEX
- TABLE: DEVELOPED STATES – TRADE AND INVESTMENT RISK INDEX
- Chapter 5: BMI Global Macro Outlook
- As Good As It Gets?
- TABLE: GLOBAL MACROECONOMIC FORECASTS
- TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
- TABLE: SWEDEN – MACROECONOMIC DATA AND FORECASTS