STOCKHOLM (Reuters) -Sweden’s economy slowed sharply in the first quarter of the year, data from the Statistics Office showed on Monday, confirming that the lingering effects of the pandemic and war in Ukraine have put the brakes on growth.
Gross domestic product (GDP) contracted 0.8% compared with the final quarter of 2021, downwardly revised from the previous estimate of a 0.4% decline. On the year, the economy grew 3%, unrevised from the previous estimate.
“The downturn was relatively broad but negative net exports were the biggest contributor, Jessica Engdahl, section chief at the Statistics Office said in a statement.
Sweden’s trade balance was -1.8 billion crowns in April, separate data showed.
The country’s economy weathered the pandemic relatively well, but lingering problems with bottlenecks and supply, worsened by Russia’s invasion of Ukraine, look like finally catching up with companies.
Furthermore, households are feeling the pinch from surging inflation and eyeing higher mortgage costs as a result of an expected series of rate hikes.
The central bank raised its benchmark rate at the end of April and said it would have to hike several more times this year and next to keep inflation – at 6.4% in April- in check.
Markets expect the Riksbank to be forced into even more aggressive policy-tightening than rate-setters currently plan.
Households have already turned gloomy with the latest survey showing consumer confidence at its lowest level since the financial crisis of 2008-2009, though retail sales are still holding up well.
In it’s most recent forecast, the central bank cut its outlook for growth this year to 2.8% from 3.6% and also lowered its expectations for the coming years.
(Reporting by Simon Johnson; editing by Niklas Pollard)
