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SWEDEN AND RUSSIA

Swedish engineering giant ABB to quit Russia over Ukraine

Swedish-Swiss engineering giant ABB said on Thursday it will quit Russia as a result of the war in Ukraine and the related international sanctions against Moscow.

Swedish engineering giant ABB to quit Russia over Ukraine
A worker at Hitachi ABB Powergrids in Ludvika. Photo: Fredrik Sandberg / TT

Russia accounts for only one or two percent of ABB’s overall annual turnover and the decision to pull out will have an estimated financial impact in the second quarter of around $57 million, the group calculated.

“ABB has decided to exit the Russian market due to the ongoing war in Ukraine and impact of related international sanctions,” the group said in a statement.

Russia accounts for only one or two percent of ABB’s overall annual sales and the decision to pull out will have an estimated financial impact in the second quarter of around $57 million, the group calculated.

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A large number of major western companies have pulled out of Russia since Moscow invaded its pro-Western neighbour on February 24.

“When the war broke out, ABB stopped taking new orders in Russia,” the group said.

At the same time, it said it continued to fulfill “a small number of existing contractual obligations with local customers, in compliance with applicable sanctions.”

Most of ABB’s dedicated Russian workforce has been on leave since March “and the company will do its best to support them as it realigns its operations in a controlled manner,” it said.

ABB has about 750 people in Russia and two production sites in the country located in the Moscow region and Lipetsk, as well as several service centres.

Separately, the group said that its net profit fell by 50 percent to $379 million in the second quarter, largely as a result of one-off charges, but also the cost of withdrawing from Russia.

Sales, on the other hand, grew by six percent to $7.2 billion in the period from April to June, ABB said.

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MONEY

NEW FORECAST: What’s next for the Swedish economy in 2024?

Sweden’s economic downturn will bottom out in 2024 and the key interest rate will be lowered four times this year, according to a new forecast by Sweden’s National Institute of Economic Research (NIER).

NEW FORECAST: What's next for the Swedish economy in 2024?

Sweden’s GDP will grow by 0.8 percent this year before rising to 2.5 percent next year, according to the new forecast. However, unemployment will continue to rise, hitting 8.3 percent this year, before dropping in 2025.

The institute’s core measure of inflation, CPIF, which strips out the effect of interest rate rises, fell to 2.5 percent in February. The institute expects that it will continue to drop throughout 2024, reaching 1.2 percent by the end of the year, far below the Riksbank’s 2 percent target.

“Inflation has fallen quickly and will continue to fall throughout 2024,” NIER’s head of forecasting, Ylva Hedén Westerdahl, told a press conference. “We’ve reached a stable price level and prices are going to increase at a more normal rate from now on.” 

The institute expects the Riksbank, Sweden’s central bank, to start cutting its key interest rate – currently at 4 percent – from June, with four total decreases throughout the year, reaching 3 percent by the end of 2024 and 2.25 percent by the end of 2025.

This, along with lower interest rates, increased consumption and a rise to real wages is expected to speed economic recovery.

“The biggest risk for this forecast would be if [interest rates don’t go down], and central banks are forced to make a U-turn and keep their rates high,” Hedén Westerdahl said.

GDP fell slightly in the final quarter of last year, but is expected to rise in the first quarter of 2024. Despite this, growth will not be strong enough for the economy to start to recover until the end of the year and the country will remain in a period of low growth until 2026, the institute predicts.

Consumers have also become less pessimistic about their own finances and more positive about the future, partly due to inflation nearing the Riksbank’s 2 percent target rate.

Swedish exports are expected to start to grow again in the second quarter of this year, albeit slowly, due to weak demand from abroad – the Eurozone in particular, where growth has been weak, as well as the US, where GDP growth is expected to slow throughout the year.

Joining Nato may also have an impact on Sweden’s economy, as increased defence spending means faster growth in central government consumption throughout this year and into 2025. Local governments, on the other hand, have weak finances and will need to make cutbacks in some areas, leading to comparatively weak consumption growth in both years, and a public finance deficit next year.

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