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ECONOMY

Which areas in Sweden have the best economic prospects?

As Sweden sinks deeper and deeper into the economic downturn, only Norrland and its booming green industry sector is expected to see its economy grow next year.

Published: 26 September 2023 14:55 CEST
Updated: 30 September 2023 15:35 CEST
Which areas in Sweden have the best economic prospects?
The coating line at Northvolt's Northvolt Ett factory in Skellefteå. Photo: Jonathan Nackstrand/AFP

Acccording to the latest regional forecast from the Nordea bank, the economies of Upper Norrland (Västerbotten and Norrbotten), and Central Norrland, (Jämtland and Västernorrland), will grow by 1 percent and 0.5 percent respectively next year, compared to a fall of 1.3 percent for Sweden’s economy as a whole.

At 3.7 percent, the unemployment rate in Västerbotten, home of the Northvolt battery plant and several big wind power developments, is the lowest in Sweden. 

The economy of Småland, Öland and Gotland will stand still, and the economies of Western Sweden, Southern Sweden, Stockholm, Eastern Central Sweden and Northern Central Sweden, will fall by 0.5 percent, 0.3 percent, 0.2 percent, 0.3 percent, and 0.1 percent respectively. 

“The differences are unusually big and will grow further in the coming year,” said Susanne Spector, the bank’s chief analyst and author of the report.

“Things are looking best in the north: they’ve had a short dip but now things are pointing upwards again,” she said. 

This year, the economy of Upper Norrland is expected to hold steady at 0.0 percent, which is still better than the other regions which are all expected to have negative growth.

Below we break down the outlook for each region. 

Upper Norrland

Nordea’s report calls Upper Norrland, which includes Västerbotten and Norrbotten, “best in the class”, explaining that “big industrial investments” are keeping growth high despite a global economic slowdown.

According to the report, the region’s manufacturers had reported a fall in orders in the spring, but that this had already bounced back with the National Institute of Economic Research’s industrial barometer back above average, with signs that the service sector is also increasing hiring.  

The region is expected to see its economy grow by 3 percent between 2022 and 2025, the highest rate in Sweden. The only industry struggling is the building industry, which has seen the rate at which new building projects are started fall by nearly 60 percent in response to rising interest rates. 

Central Norrland 

According to the report, the economy in Central Norrland, which includes Jämtland and Västernorrland, is “stable”, with the pace of green industrial development in the north of Sweden having knock-on effects in the region. 

The region is also benefiting by increasing orders for its defence manufacturers as a result of the war in Ukraine. 

Central Norrland is expected to see its economy grow by 0.5 percent on average between 2023 and 2025, and the unemployment rate has fallen below that of Western Sweden, to rank second lowest behind Upper Norrland. 

The big challenge for the region is the declining population, which is leading to a labour shortage which acts as a break on development. The region was the only one in Sweden to see its population fall in 2022. 

Stockholm

Stockholm’s economy is the most interest rate sensitive, due to the high prices of houses and apartments in recent years. The construction sector is particularly hard hit, with the rate at which new building projects are started falling by 70 percent. 

According to Nordea, the city’s powerful service industries are compensating for this, leaving expected growth in 2024 falling just 0.2 percent, while employment will rise 1.6 percent, only slightly behind central Norrland. 

Despite this, the unemployment rate in Stockholm is rising higher than average in Sweden, due to the high growth rate of its population. 

Western Sweden 

Western Sweden (Västra Götaland and Halland) is heavily depending on the car manufacturing industry, which means it often follows a slightly different business cycle to the rest of Sweden. 

Last year production in the local car industry fell by 4 percent. Vehicle production has bounced back to 20 percent this year, but according to Nordea, this is primarily to fulfil delayed orders, with the number of new orders in decline. 

“The strong development in the car industry so far this year means that Western Sweden is showing strong resilience in 2023, while the bleak outlook means it is expected to see the worst economic fall next year,” the report reads. 

Employment grew by 1.3 percent in the second three months of 2023, but is expected to fall off sharply next year with layoffs increasing and new hiring grinding to a near halt. 

Southern Sweden

The economy in Southern Sweden (Skåne and Blekinge) has been hit particularly hard by the high electricity prices in 2022, and there is little sign that the weak krona has drawn over enough border shoppers and tourists from Denmark to prop up the economies. 

According to Nordea’s report, shops in Southern Sweden are more concerned about excess stock than their counterparts in other regions, and the region’s service sector is pessimistic about growth in the near future. 

The rate at which new construction projects are starting has fallen by 74 percent, with many in the building industry being laid off. 

In August, Skåne once again registered the highest unemployment rate in Sweden. Growth in Southern Sweden is expected to fall by an average of 2 percent in 2023.

Småland and the islands 

Småland was also hit by high electricity prices in 2022 and the start of 2023, high interest rates have also had an impact, and the local furniture industry, dominated by Ikea in Älmhult, has seen a 15 percent drop this year. 

But according to Nordea, the region’s retailers say stocks levels are normal, suggesting they are less hard hit than in other regions, while employment rose by 0.7 percent in the second quarter of 2023 and the unemployment rate remains at a low level. 

Eastern Central Sweden (Uppsala, Västmanland, Södermanland, Örebro, Östergotland)

Eastern Central Sweden, as usual, is following a similar trajectory as Sweden as a whole, with an 80 percent fall in new build starts, and a fall in new jobs being offered this year, after several years when the region saw one of the highest rates of new job offers in Sweden. 

The region is expected to see its economy fall by 1.5 percent in 2023 and by 1.3 percent in 2024. 

Northern Central Sweden (Gävleborg, Dalarna, Värmland)

This region has been hit by a 10 percent slump in the paper and pulp industry this year, with the National Institute of Economic Research’s regional industrial barometer pointing to the region as the one where the manufacturing industry is seeing the biggest struggles. 

The retail industry is also being dragged down, with local shops finding it harder to shift stocks than those of any other region. 

The employment and unemployment rate has so far show resilience, but Nordea expects this to change with employment falling in the near future. 

Nordea expects the region’s economy to fall by 1.8 percent this year and 0.1 percent in 2024.

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MONEY

How Sweden’s 2024 spring amendment budget could affect you

The Swedish government announced its spring amendment budget on April 15th. How will it affect people living in Sweden in the coming year?

Published: 15 April 2024 10:51 CEST
How Sweden's 2024 spring amendment budget could affect you

What is the government aiming for with this budget?

The government has said that this budget, negotiated with the support of the Sweden Democrats, is part of its long-term plan to navigate Sweden’s difficult economic situation, which has the following aims:

  • Fight inflation and support households and welfare

The aim here is “to pursue well-balanced fiscal policy to help drive down inflation while more evenly distributing the burden of high prices”, the government explains on its website.

  • Re-institute the “work-first” principle

The work-first principle is essentially the idea that it should be more profitable for an individual to work than to be unemployed.

The government predicts that an additional 40,000 people could become unemployed this year due to the current state of the economy, and plans to address this by providing training and education initiatives to better equip jobseekers, as well as “remedying the labour market’s structural problems” and “reinforcing the motivating factors behind work and self-sufficiency”.

  • Structural reforms for stronger growth

Here, the government plans to “shift the focus back to economic development”, by introducing structural reforms to increase productivity and improve long-term growth.

How will proposals in the spring amendment budget affect us living in Sweden?

Much of the budget is aimed at mitigating any adverse effects of the current state of the Swedish economy, with these proposals aiming to keep the status quo and stop things from getting worse.

For example, one of the largest posts in the new budget is 6 billion kronor to Sweden’s regions, which will go towards compensating for the effects of inflation and avoiding dismissals of healthcare staff. This is in addition to 1.5 billion kronor for increased pharmaceutical costs and a 500 million kronor “extra knowledge grant” in additional regional funding for schools.

There are also proposals designed to help anyone who becomes unemployed over the next year, like a proposal to allocate 167 million kronor to creating more places in adult education, as well as extending the temporarily increased housing allowance for economically disadvantaged families with children at a cost of 650 million. The government has also proposed an allocation of 130 million kronor to Swedish municipalities which will be used to fund summer jobs.

There are also investments designed to strengthen law enforcement and improve the safety and security of people living in Sweden, like an allocation of 260 million kronor to the Tax Agency, customs and the Swedish Enforcement Authority which will be used to “crush” criminal finances, as well as 1.38 billion kronor to fund more prison places, 1.035 billion kronor in funding to improve security and baggage handling in airports and 100 million kronor to the Swedish courts.

Some of the proposals are also aimed at improving Swedish defence, like a 300 million kronor allocation to the Swedish Armed Forces and 385 million kronor for strengthening civil defence.

The government has also announced plans to lower tax on both pensions and income, lower fuel tax, and remove tax on the first 300,000 kronor of savings in ISKs – investment saving accounts.

In terms of budget proposals which will affect immigrants in particular, 25 million kronor has been allocated to attracting international talent, 20 million kronor will go towards funding Swedish courses for Ukrainian refugees, and 138 million will cover costs associated with getting Ukrainians on to Sweden’s population register.

How has the opposition reacted?

The Social Democrats’ economic spokesperson, former Finance Minister Mikael Damberg, called it “a tangled mess of proposals” and an “odd budget”, adding that it was “not a budget for the Swedish people”.

He added that the government should not just be focusing on growing the police force, but also on identifying young people who are at risk of sliding into a life of crime, so that social services can step in at an early stage.

The opposition also criticised the government for not doing enough to support Swedish regions, arguing that six billion kronor is not a sufficient investment to solve the healthcare crisis.

The Social Democrats will present their shadow budget in two weeks.

“We think that families with children are in a much worse position due to this crisis. We think that banks have taken out too much in profits, and that there’s a possibility to work with the power of consumers and use the state bank, SBAB,” Damberg said, adding that his party would like to see a bank tax in the new budget.

The government’s decision to scrap tax on ISK savings has also been criticised by two major authorities: the Financial Management Authority (ESV) and the National Institute of Economic Research (NIER, KI in Swedish). 

NIER said in a response to the proposal that the tax cut benefits represents a large tax cut to people who already have substantial savings, rather than encouraging people to save more.

“If you’re trying to get more people to save, it’s difficult to understand why the government is setting the limit at 300,000 kronor,” the author of NIER’s response to the proposal, Sebastian Escobar-Jansson, told Swedish news agency TT. 

Over half of people with ISK accounts have savings of less than 74,000 kronor.

“More than half of the tax cut benefits those who already have more than 300,000 kronor in an ISK,” ESV added.

In 2024, tax on ISK accounts is 1.086 percent, which is paid whether the account’s investments are making a profit or a loss.

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