Data this week could confirm how Sweden’s contentious decision to avoid a full lockdown at the start of the coronavirus pandemic has spared its economy from the worst of the fallout.
On Wednesday, Sweden will publish a keenly anticipated flash indicator for second-quarter GDP, and economists surveyed by Bloomberg are expecting a 7% contraction, according to median estimates.
While that would mark an unprecedented drop for the Nordic region’s biggest economy, it’s considerably less than the recent hits suffered in the U.S. and the 19-member euro area.
“The Swedish economy has not been unscathed, despite its light-touch lockdown, but we think that the quarterly drop in GDP in the second quarter is likely to have been about one-third of that seen in the euro-zone,“ said David Oxley, an economist at Capital Economics, in a note to clients.
But the strategy has also resulted in Sweden having one of the highest death rates in the world, at 56.4 per 100,000, and it’s unclear whether the economy will fare much better than in neighboring Denmark and Norway, which initially imposed strict lockdowns and have seen substantially lower fatalities.
“We do not know how the virus strategy will affect the economies in the long run,” said Nordea economist Torbjorn Isaksson in emailed comments. “Our Nordic neighbors locked down but may be able to open up and normalize faster.”
What economists are saying...
- Nordea expects a “painful” drop in GDP by 8.5% q/q and 8% y/y in 2Q, in line with the Riksbank’s view
- Swedbank foresees a 2Q GDP contraction of 7.5% q/q and 7.0% y/y, making it “the biggest GDP drop in memory”
- SEB expects a GDP drop of 8.0% q/q and 7.7% y/y, saying that “GDP is most likely start to recover in 3Q, though strength of the upturn remains uncertain.”
- Danske Bank economists see Swedish GDP falling 7.1% y/y and -6.3% q/q
- Capital Economics expects GDP to drop 4% q/q and 3.7 y/y, which would be “about half as big as that of the Riksbank and other forecasters.” They also add that the economy has “still faced a deep crunch by normal standards.”
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