Finished the holidays. Business has picked up in Sweden, in a particularly gloomy climate. Because as the clouds gather over the economy of the northern kingdom, no clearing is in sight. Worse still: according to analysts, the bad news that follows one another, both economically and politically, only reinforces investors’ distrust of the Swedish krona.
On Monday August 21, it reached its lowest level against the euro, with an exchange rate of 1 euro for 11.96 crowns – against 10.24 crowns in August 2021, a drop of more than 16% in two years. In Stockholm, two days later, the Swedbank, a private bank, estimated that it had not yet reached the bottom.
“It’s going to be worse before it gets better”, summed up Mattias Persson, its chief economist. Not only does the bank estimate that inflation – at +9.3% year on year in July – should remain high, but it expects further interest rate hikes, in the wake of the Swedish central bank’s key rate. , the Riksbank, already at 3.75%, and which could reach 4.25% by the end of the year.
Impacts on Households and Real Estate
For households, there are many reasons to be pessimistic. According to the Central Statistical Institute (SCB), inflation and rising interest rates cost Swedes 108 billion crowns (9 billion euros) in 2022 – 92 billion due to rising prices and 16 billion caused by the increase in the cost of their credit.
With one of the highest debt ratios in Europe and often short-term loans, the Swedes took the full brunt of the growth in interest rates. Example: for a loan of 3 million crowns (250,000 euros) negotiated at a variable rate – and reduced from 1.38% in November 2021 to 4.5% – the cost has increased by 8,000 crowns (675 euros) per month.
Households are not the only ones in difficulty. Over-indebted, real estate groups have also taken the brunt of the rise in rates. Among them, the SBB company, which owns 2,000 properties in the country (including many buildings housing public services), is currently selling off its assets in a desperate effort to avoid bankruptcy, which many foreign analysts fear will destabilize the banks of the kingdom.
The building sector is also at half mast: despite the crying need for new housing, especially in the big cities, the construction of only 14,550 new apartments was started in the first half, according to SCB, i.e. 57% less than in the same period in 2022 – the lowest figure since 2012.
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