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FINANCIAL CRISIS

Is it time for Sweden to brace for an economic downturn?

With growth faltering nationally, and the prospect of hard Brexit and a global trade war on the horizon, is it time for Sweden to start getting ready for an economic downturn?

Is it time for Sweden to brace for an economic downturn?
Experts believe the trigger for a downturn in Sweden is likely to come from overseas. Photo: Fredrik Sandberg/TT
Ylva Hedén Westerdahl, head of forecasting at the National Institute of Economic Research, said Swedes should not think today's good times will continue forever. 
 
While external shocks like Brexit or a trade war will only hit exporters directly, indirectly they could push down house prices, destabilize financial institutions, make salary growth stagnate and cause rising unemployment. 
 
“When house prices fall, then house-owners start to feel poorer and so they cut their consumption and start to save more,” she told the TT news agency.
 
 
Another big worry for the property market is whether the large numbers of newly built houses shortly to come onto the market will be sold. 
 
“The question is how they are going to be sold,” Westerdahl said. “Overproduction means that housing investments and prices could fall even more.”
 
But banks are not as exposed to mortgages as they were in the run up to the 2007 and 2008 financial crisis. 
 
 

Ylva Hedén Westerdahl. Photo: Anders Wiklund/TT
 
John Hassler, Professor of Economics at Stockholm University's Institute for International Economic Studies, argues that households in Sweden are not generally financially overstretched. 
 
A bigger worry, he said, was commercial property owners, some of  whom could go bankrupt in a downturn. 
 
“That's the part of the loan portfolio which is a little more uncertain,” he said. 
 
If that leads to a confidence crisis in the housing sector, banks could star pulling in lending to households and other investment projects, he warned. 
 
“The blood flow in the system might ground to a halt and that's very serious.” 
 
 
If the crisis is serious enough to push any of the banks into a crisis, then that could hit the entire economy seriously, forcing the national government to come to the rescue and guarantee some banks' borrowing. 
 
Luckily, he said, Sweden's cautious fiscal policy over the past 20-25 years had left it with considerable firepower to bail out banks in the event of a crisis. 
 
“If we had the same debt levels as France or Italy we would have been toasted.”
 
 
Most economists see Sweden's next economic downturn as coming from external factors, such as a financial crisis in Sweden, a crisis in the Eurozone, or a trade war between the US and China. 
 
The first industry segments to be hit will be big exporters such as Scania and Swedish steel giant SSAB. 
 
How much their troubled hit the wider Swedish market depends on how willing they are to hold onto their staff despite drops in sales, Hassler said. 
 
“They were willing to do that during the [2007] finance crisis but not during the 1990s economic crisis, when companies realized they weren't competitive enough,” he said. 
 
If there are mass layoffs, he said, the weakest members of the workforce would be the worst affected. 
 
“It has been tough for those with a low level of edcuation or a foreign background to get a job even during an economic boom, and for them a downturn would of course be much worse.”

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MONEY

Your January budget: Five ways to save money in Sweden this month

It's the start of the year and the end of the indulgence of the holiday season. Here's how to try to claw back some space in your wallet in Sweden.

Your January budget: Five ways to save money in Sweden this month

Take inventory of your bills

The start of the year is a good time to go through your regular bills and see if there’s a way you can save money there. Don’t forget to check your direct debit (autogiro) payments to see if you’re paying money for subscriptions you no longer use. Here are some more tips for reducing your regular bills.

Buy seasonal food

Seasonal produce is usually cheaper – and better for the environment.

Things to look for in Swedish grocery stores in January include: Green kale, Brussels sprouts (added bonus: they’re usually priced down after Christmas), turnips, carrots, swedes, red beets, red cabbage, white cabbage, artichokes, onions and apples. These are grown in Sweden and can be bought fresh this time of the year.

Aubergine, oranges and lemons, kiwi, spinach, broccoli, cauliflower and fennel are in season in other parts of Europe.

Get a cheaper deal on your electricity

Electricity prices soared to record levels in Sweden last year, and they’re expected to remain high in 2023 too.

Compare the prices of various electricity companies at price comparison sites, such as Elskling, and don’t be scared of calling your company to negotiate.

Swedish houses are generally well insulated, so in the shorter term, save money by turning your heating down just slightly, making sure your dishwasher and washing machine are full before turning them on, and having shorter showers. Here’s The Local’s guide to how to dress to keep warm in the Swedish winter.

The cost of electricity depends on your living situation. Electricity tends to be the most expensive in southern Sweden, and your bills are likely higher if you own a house rather than an apartment. If you’re staying in a sublet or an apartment housing association, it is possible that the cost is included in your monthly rent, or avgift, if you own your property.

Save money on your gym membership

Who hasn’t joined a gym the weeks after New Year’s Eve? The downside is they’re expensive, so the best way to save money is not to join a gym at all. Instead, look out for outdoor gyms (utegym – they look like a wooden playground) scattered across Swedish cities and free running and exercise groups in your area.

In January, you ask. Yes, in January. Even in the snow? Yes, then too.

Pavements are often kept clear of snow in Sweden and you will see people exercising come rain, snow or shine. Just remember to dress right (not too warm, but gloves and a hat are sensible) and invest in a good pair of ice studs for your running shoes – it’s a one-time cost that will pay off in the long run.

If you do want to go to the gym, it’s worth asking your job if they can pay for your membership as a friskvårdsbidrag (health contribution), a tax-exempt benefit that many employers offer in Sweden and means you can get money to put towards a sports activity of your choice (no more than 5,000 kronor per year).

Make the most of the end-of-year sales

The post-Christmas sale (mellandagsrean) might still be ongoing in some shops with prices dropping lower and lower. Have a think about what you need to buy for the year ahead in terms of things such as clothes, electronics or furniture, and then go online to see if you can find what you need at a reduced price. The key is to plan your purchase before you go shopping and not let yourself be tempted by things that seem great at the moment, but won’t be needed or wanted six months from now.

Off-season items are often the cheapest, so buy your summer clothes now, or even your winter boots for next year. Or better yet, don’t buy anything at all. Maybe it’s cheaper and more sustainable to fix things you’ve already got. There’s also a booming second-hand market in Sweden where you can grab a bargain.

Did you buy or receive Christmas presents that weren’t quite right? Know your right to return items. This guide by The Local explains the rules in Sweden.

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