Throughout 2015, Sweden’s GDP growth expanded. The economy grew 1.3% q/q and 4.5% y/y in Q4. The strong growth is mainly because of solid domestic demand that contributed over one percentage point to overall consecutive GDP growth. Solid growth of general and goods exports was the main surprise on the upside. According to Danske Bank, the solid growth of exports is likely to be for a brief period of time.
However, Sweden’s economic indicators have lost certain momentum. This along with the temporary exports effect and continued uncertain environment suggests that the Sweden’s economic growth will moderate in the near term, according to Danske Bank. Moreover, Sweden’s monetary policy expansion is likely to continue boosting investments and consumptions, but mainly to work through keeping a floor below the Swedish krona and making the nation’s exports more competitive, added Danske Bank.
Public expenditure is another force behind the country’s expected high growth rates. Public expenditure is likely to contribute 0.5pp to the GDP in the coming years, outgrowing most other GDP components.
However, the Swedish economic outlook is clouded as solid growth for demand in the past years suggests modest growth in business sector investments, but the SCB’s investment survey implies negative growth in investments this year. Nevertheless, strong growth in demand and demographics suggest positive growth in investments in coming years.
“We expect the contribution to GDP from investments growth to be between 0.25-0.5pp per year”, says Danske Bank.
For several years, consumption has remained strong and consumption growth is likely to be stable in the forecast years, added Danske Bank.
“GDP growth should be close to 3% y/y (wda) in 2016. Next year, we forecast GDP growth to decelerate to 2.0% y/y (wda), as a few one-offs fall out and consecutive GDP growth rates approach sustainable levels”, says Danske Bank.
The material has been provided by InstaForex Company – www.instaforex.com