The biggest Nordic economy may be about to sink into its worst recession in living memory, with the fallout of the coronavirus likely to do more damage than the financial crisis of 2008.
Gross domestic product will probably fall about 4% this year, Swedbank economists said in a new report on Wednesday. But the decline could be as bad as 8%, if the economic shock forces a wave of companies into bankruptcy, they said. Unemployment is expected to exceed 10% in the coming months, “despite unprecedented fiscal stimulus,” they said.
The forecast shows how quickly the spread of the virus has turned everything on its head. As recently as January, Swedbank was predicting that Sweden’s economy would expand 1.4% this year. But with the global economy in lockdown, the trade-reliant Nordic nation now faces a recession that will be “wider and faster than during the financial crisis,” according to Swedbank.
The Riksbank, which ended negative rates in December, has made clear it will rely on other support measures besides rate cuts. These include purchases of corporate bonds and cheap bank loans to prevent a credit crunch.