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MONEY

2021 forecast: Vaccination progress will determine Sweden’s economic outlook

The Swedish economy has withstood the second wave of the pandemic better than the first, said the country's Central Bank as it released its new forecast for the interest rate.

Published: 10 February 2021 10:43 CET
2021 forecast: Vaccination progress will determine Sweden's economic outlook
Sweden's interest rate is expected to remain at zero until 2024. Photo: Izabelle Nordfjell/TT

The Riksbank warned that the pandemic was still having an impact on the economy and that much uncertainty about the future remained, adding that service industries were under “severe pressure” due to low consumption.

“Overall, however, the economy has been more resilient to the second wave of the pandemic than to the first. Vaccinations are now under way. As soon as the spread of infection decreases and restrictions are lifted, households are expected to return to more normal patterns of consumption, which will create favourable conditions for a rise in demand,” it said in its latest monetary report, released on Wednesday morning.

But it also said that the extent of the crisis meant that it would likely take until 2023 before the Swedish inflation rate permanently reaches the bank's target of two percent.

“Economic developments in 2021 will be largely determined by how quickly and effectively vaccinations reduce the pandemic,” it added.

The Riksbank said it would continue to purchase assets within the 700 billion kronor framework as previously decided, and hold the country's key interest rate, the repo, at zero percent. It predicted that the repo rate would remain at zero until 2024.

EDITOR'S PICK:

The bank took the landmark decision to slash the rate below zero in February 2015, hoping that the strategy would boost inflation to raise the price of everyday goods and services which had been stagnant, and therefore improve the Nordic nation's economic prospects. Almost five years later, it was raised from -0.25 to zero in December 2019.

Sweden's GDP is expected to grow 3.0 percent this year, which is higher than the bank's previous forecast of 2.6 percent, released in November, and 3.9 percent next year (lower compared to the previous forecast of 5.0 percent). Unemployment is expected to land at 8.5 percent this year, down from the previous forecast of 9.4 percent.

More than 300,000 people in Sweden have received the first dose of the coronavirus vaccine, but Swedish officials warned on Wednesday that distribution issues may cause vaccinations to be delayed.

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COST OF LIVING

Cost of living: How expensive is Sweden compared to a year ago?

Those living in Sweden have no doubt noticed that things have become a lot more expensive over the past year – but just how much more expensive is life in Sweden than a year ago?

Published: 10 August 2023 15:21 CEST
Updated: 3 September 2023 08:02 CEST
Cost of living: How expensive is Sweden compared to a year ago?

How much does fuel cost?

This depends on what kind of fuel you use – a litre of ethanol for example costs around half that of HVO100, a renewable alternative to diesel. All the prices listed below were the average price on August 10th, 2023.

For those using petrol, specifically Bensin 95 (unleaded petrol), the price per litre on August 10th was 20.89 kronor, compared to 19.33 kronor per litre a year ago.

The price of ethanol, also sold under the name E85, has remained relatively stable over the past year, standing at 15.10 kronor per litre on August 10th, compared with 15.87 kronor per litre in August 2022.

Diesel prices are a bit higher at 24.36 kronor per litre in August 2023, up from 22.91 last year.

Finally, the price of HVO100 is around 30.67 kronor per litre this month, up from 28.87 in 2022.

What about energy prices?

Energy prices are in general lower in summer than winter, especially given the wet and dreary summer Sweden has had, which has been good news for wind and hydropower.

The most recent figures available are from July 2023, and prices vary depending on which energy price zone you live in. All prices here are rörliga or variable monthly rates – not hourly rates – and they don’t include VAT, so the actual amount on your energy bill will be higher.

We’ve used prices from Vattenfall, one of Sweden’s largest energy producers.

Energy zone 1 – the cheapest energy zone – is in the far north of Sweden, and it includes Norrbotten county and part of Västerbotten county.

Prices in zone 1 last month were around 47.93 öre per kilowatt hour, higher than the 31.61 öre per kWh consumers in energy zone 1 paid last year.

Energy zone 2 is slightly further south, and it includes Jämtland county, Västernorrland county, and parts of Gävleborg and Västerbotten counties.

Prices here were similar at 47.95 öre per kWh in July compared to 31.64 öre per kWh in 2022.

Energy zone 3 covers central Sweden, encompassing Stockholm and Gothenburg, as well as Stockholm county, Södermanland county, Uppsala county, Värmland county, Västmanland county, Örebro county, Östergötland county, Dalarna county, and parts of Halland, Kalmar, Jönköping, Västra Götaland, and Gävleborg counties.

Here, prices were extremely high at this time last year – a whopping 100.89 öre per kWh in July 2022 – although the figures for this year are much lower at 48.66 öre per kWh.

Energy zone 4 – the most expensive zone – includes Malmö, Skåne, Blekinge, Kronoberg, and parts of Kalmar, Halland, Jönköping and Västra Götaland counties.

In July year, users in this zone were paying an eye-watering 137.58 öre per kWh, with this year’s figures a much more reasonable 52.78 öre per kWh.

There’s also some good news for Swedish households this autumn as prices are not expected to be anywhere near the levels seen last year, mainly due to water reservoirs (crucial for hydropower) being well-filled by the recent rain, and also due to well-stocked gas reservoirs in the rest of Europe cutting the continent’s reliance on Russian gas.

Of course, this may change, especially if the war in Ukraine worsens, but for now at least, it seems like Sweden is in for a cheaper winter on the energy front this year than in 2022.

How are property prices faring?

Over the past three months, the average price of an apartment in a housing cooperative – a bostadsrätt – was 43,608 kronor per square metre, according to Svensk Mäklarstatistik, an organisation that keeps data on the real estate market.

The average sales price of apartments across the country over the same period was 2,787,000 kronor, with prices highest in Stockholm, Gothenburg and Malmö, and lower elsewhere.

When it comes to the price of detached homes or villor over the past three months, sales prices have been lower, at 30,100 kronor per square metre, although the average sales price was higher, at 3,714,000 kronor.

Compared to last year, apartment prices are down 2.4 percent from 43,092 kronor per square metre and an average sales price of 2,767,000 kronor. The decrease is even larger for detached houses, which have gone down 10.2 percent in value in the past 12 months from a price per square metre of 29,547 kronor and an average sales price of 3,689,000 kronor.

Of course, that doesn’t say much about how much housing costs have increased for the average person in Sweden.

The Financial Supervisory Authority’s most recent report on housing costs for mortgage holders in Sweden is from March 2023, and it indicates that households in Sweden spend on average 12 percent of their income on interest rate payments, which is 2 percent higher than in 2022, and also the highest figure measured by the authority since records began in 2012.

The key interest rate has increased by 0.75 percentage points since March 2023, so this number is now likely higher.

This does not take into account the cost of paying off a loan – amortering – with government regulations stipulating that households must repay between 0 and 3 percent of the total value of the loan per year, depending on how large their loan is in comparison to their yearly income, and how large their cash deposit was in relation to their mortgage.

In terms of rental properties, the Swedish Tenants’ Association which is responsible for negotiating first-hand rentals, has agreed rent hikes of around 4 percent, on average, compared with last year.

For people in second-hand rentals, landlords are able to set prices at a level which covers their own mortgage costs – so it is likely that prices have gone up in line with increased interest rates for property owners.

How much have food prices gone up?

It’s difficult to say in kronor how much food prices have increased, as your food shop depends so much on the exact products you usually buy.

Instead, we can look at the general percentage increase of a number of items across all the largest chains, which is exactly what food price comparison site Matpriskollen has done.

According to the site’s statistics, food prices went up by 0.2 percent month-on-month in July. Price hikes were recorded on 20 percent of the 43,000 items measured, while 9 percent of products decreased in price. The majority of products – 71 percent – stayed the same price in July.

On a yearly basis, food prices have increased by 9.5 percent. Looking back to January 2022, when prices first started going up, the price of food has gone up by a whopping 21.6 percent.

So, how much more expensive is it to live in Sweden than it was a year ago?

The best way to look at this is by using the figures for inflation, collected by Statistics Sweden. The Consumer Price Index (CPI) is the standard measure for inflation in Sweden, which measures the average change in prices paid by consumers over a set period of time.

Figures for July or August have not yet been released, but the most recent CPI figures in June indicate that Sweden became 9.3 percent more expensive between June 2022 and June 2023.

CPIF inflation – the consumer price index with a fixed interest rate – is slightly lower, with an increase of 6.4 percent between June 2022 and June 2023.

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