For the average household, the inflation shock means that purchasing power is reduced by SEK 35,000 this year alone, according to Christina Nyman, Handelsbanken’s chief economist.
According to Nyman, the culprit in the drama – which makes the inflationary shock so much tougher in Sweden – is the krone.
“The weak krona contributes to higher inflation than in many other countries. The result will be a clearly impaired purchasing power for households in 2023, even if export companies benefit,” the bank writes in a press release.
“There is no point in the government and the Riksbank trying to talk up the krona. In order to raise the krona rate more, a long-term focus on growth and stability is required,” writes Nyman in a comment.
The Swedish economy is expected to shrink
The Swedish economy is expected to shrink by 0.8 percent in 2023, followed by a recovery of 1 percent in 2024, according to Handelsbanken. In the most recent previous forecast, GDP numbers were minus 0.1 percent this year and plus 1.6 percent next year.
For 2025, Handelsbanken adds a growth forecast of 2.6 percent, according to the calendar-adjusted figures.
The inflation forecast for this year is simultaneously raised to an average of 9.2 percent according to the CPI measure, up from 8.8 percent in the most recent previous forecast. And for 2024, the inflation forecast is simultaneously raised to 2.7 percent, up from the previous 2 percent.
Unemployment also appears to be increasing faster than expected, according to Handelsbanken’s recent report. It is expected to rise to 7.9 percent this year and 83 percent in 2024, against a previous forecast of 7.4 and 7.9 percent, respectively.
As for the Riksbank, Handelsbanken’s economists expect a key interest rate of 3.25 percent this year, 2.75 percent in 2024 and 2.50 percent in 2025. There, the forecast was earlier for an interest rate peak of 2.75 percent in 2023.
“We do not believe that interest rates will return to the low levels we have had in the last 15 years. For Sweden, we expect the key interest rate to vary around 2-2.5 percent in a few years’ time,” writes Nyman in a comment.
“Part of the new everyday life”
Nor does she think energy prices are on their way back to the levels before the Ukraine war.
“We expect high energy prices to become part of the new everyday life. Climate investments and a growing demand for green minerals could further push up inflation,” writes Nyman.
As far as the salary movement is concerned, Nyman believes in a one-year agreement of around 3.5 percent. And the price slide for housing is estimated to be 20 percent from the peak, while commercial real estate prices are on the way down by 15 percent.