Swedish economy heading for a recovery. But it won’t be as straight as nails, Nordea assesses in the bank’s recent economic report with the headline “Falling in place”.
– Everything hasn’t fallen into place, it’s a process, but things are starting to fall into place. The most important thing is, of course, that inflation falls back and that the interest rate can start to be lowered. However, we do not believe that the interest rate will go back to pre-pandemic levels, says the bank’s chief analyst Torbjörn Isaksson.
Torbjörn Isaksson, chief analyst at Nordea.
Photo: Press photo/Nordea
Falling consumption and housing prices have been two sinks for the economy, but there is now a change in direction. Among other things, Nordea believes that housing prices will rise by a total of six percent during the second half of 2024 and 2025.
Despite that, housing prices are expected to be around 9 percent lower compared to the peak in spring 2022.
The forecast is based on the Riksbank moving forward with a series of interest rate cuts in 2024. Nordea believes that a first downward adjustment in May will be followed by five further cuts this year, giving a key interest rate of 2.5 percent at the end of 2024.
That is twice as many interest rate cuts as the members of the Riksbank envisioned at the last meeting in March.
The deviation depends on the fact that they have completely different perceptions of inflation trends. Nordea assesses that the rate of price increases in Sweden will fall below the central bank’s two percent target this summer.
– The krona is an uncertainty factor, but today’s exchange rate is no obstacle for the Riksbank to lower the interest rate. Our assessment is that the krona will not weaken further from here, says Torbjörn Isaksson.
A too high euro rate can put an end to a reduction in corn, according to Swedish bond traders. In a survey from SEB, they estimated that the Riksbank’s limit is SEK 12.
On Wednesday afternoon, Swedes have to pay SEK 11.62 per euro.
Rather, Nordea believes that the krona’s weakness prevents inflation from becoming far too low.
– The weak krona removes some of the downside risks we see for inflation, says Torbjörn Isaksson.
Although a lower policy rate eases the cost pressure for households, the Swedes will still have to adapt to a new normal situation. This means that the recovery will be protracted, according to Nordea.
Based on Nordea’s forecasts, the monthly cost of a variable mortgage of SEK 3 million will stabilize at around SEK 6,100 including interest deductions. It is certainly significantly lower than today’s levels of around SEK 8,700, but roughly 2 times more than before the rise in inflation in recent years. Then the corresponding monthly cost was approximately SEK 2,700.
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