Sweden's economy is the EU's worst economy: European Commission

By Al Mayadeen English
Source: Agencies
14 Feb 2023 13:44
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Swedish families are facing extreme inflation and increased housing costs as the annual inflation rate in the country rose to 12.3% last December 2022 - its highest since February 1991.

Swedish Prime Minister Ulf Kristersson at the EU leaders' summit in Belgium in October 2022. (Reuters)

In the European Commission's (EC) most recent forecast, the worst economy among the EU's 27 member states is Sweden, with an expected shrink of 0.8% in its GDP, which makes it the only EU member state experiencing negative growth.

In its forecast, the Commission said: "Households will adjust their consumption expenditure further in response to the loss of real disposable income, the high level of uncertainty, and increasing unemployment,"

Swedish families are facing extreme inflation and increased housing costs as the annual inflation rate in the country rose to 12.3% last December 2022 - its highest since February 1991.

The level of indebtedness, which has surpassed the SEK 100 billion threshold amounting to approximately $9.6 billion, combined with high mortgage interest rates, indicates a harsh decline in their purchasing power.

With that taken into consideration, unemployment is expected to skyrocket as a result, and the construction sector is expected to take a hit due to low demand. The EC anticipates Swedish firms to handle investments with caution as a result of uncertainty and interest rate fluctuations.

Still 'better than other nations'

A professor of economics at Stockholm University, Annika Alexius, explained to Swedish media that the high level of loans are contributing to household pessimism, adding that financial instiutions "have had the loans as their cash cow and they were willing to give them even if household finances have not been sufficient."

Marcus Svedberg, chief economist at one of Sweden's leading insurance companies Folksam, argued that the country's economy is in a better state than other EU nations "with a more balanced budget and relatively low national debt."

Svedborg added that Sweden comes "from higher growth levels with 2.4 percent on average per year since 2010 compared with 1.3 percent within the eurozone,"

However, Sweden's economy may experience growth again in 2024 by 1.2%, but even if that does occur, it would still have the most minimal growth in the EU by then.

This year, Ireland is expected to have the highest growth with an increase in GDP by 4.9%. Malta and Romania are expected to follow with 3.5% and 2.5% respectively, according to the EC.

Nearly 3,500 businesses declared bankruptcy in the second half of the year alone, nearly 300 more than in 2013, according to business and credit reference agency UC last month, when the previous high was set.

The proportion of bankruptcies was highest in hotels, restaurants, and retailers, with the figures generally worsening month after month.

The ongoing Ukraine conflict, the accelerating rate of inflation, and the high electricity prices that resulted from the EU's ill-conceived sanctions against Russia, which only exacerbated Europe's energy crisis, were blamed by the agency for the escalating bankruptcy crisis.