The value of the krona is determined by how the outside world looks at us. This is partly why it is so weak, say economists Anna Seim and Klas Ekund.
– A major contributing factor is that there is so much uncertainty in the markets globally. Then you look for large, stable currencies, says Anna Seim, docent in economics at Stockholm University.
Another contributing factor is that many currency traders believe that Sweden is facing a major economic crisis. Above all, many worry about problems with the commercial real estate sector, which could possibly spill over into the banking sector and cause a major Swedish banking crisis. That’s what Klas Eklund, senior economist at the law firm Mannheimer Swartling, tells us.
– It is a bit out of place to speak badly of Sweden. If the currency traders believe that Sweden is entering a combined real estate and banking crisis, then the entire Swedish economy will become even weaker, and then they will want to be in Sweden even less, says Klas Eklund.
“The medicine is continued interest rate increases”
Currency analyst Francesco Pesole at the major international bank ING shares the view that the Swedish economy has received a bad reputation.
– Currency traders see a number of national and international factors that together show that the Swedish economy will suffer a long period of economic decline. That’s why they bet against the Swedish krona, he says.
He believes that in order to increase the value of the Swedish krona, it is important that the Riksbank shows that they are prepared to continue raising the interest rate. He believes that would be a signal that they are not worried about the situation in the property market.
But neither Anna Seim nor Klas Eklund agree that higher interest rates are the right way to go.
– Raising interest rates will cause the real estate market to collapse even more, says Klas Eklund.
– The Riksbank must pursue a monetary policy that will bring down inflation, and then it is important to be forward-looking. You have to see what effects the interest rate increases we have already had on the economy, says Anna Seim.