Sweden's economy outperforms other European countries during pandemic

Richard Orange
·3-min read
Sweden did not go into lockdown and few people wear facemasks - JONATHAN NACKSTRAND/AFP via Getty Images
Sweden did not go into lockdown and few people wear facemasks - JONATHAN NACKSTRAND/AFP via Getty Images

Sweden's economy has fared better during the peak three months of the coronavirus pandemic than the European average, the country's statistics agency has reported, adding to growing evidence that the decision to avoid a full lockdown is paying economic dividends. 

The country's gross domestic product (GDP) fell by 8.6 per cent in April and June, compared to the preceding three months, Statistics Sweden reported. 

The average drop of the ten member states who have so far submitted flash estimates for the three months is 11.9 per cent, the EU's statistics agency reported last week. Spain, France and Italy did still worse, with their economies contracting by 18.5, 13.8, and 12.4 percent respectively.   

This is the biggest quarterly drop for Sweden since 1980, meaning the country has taken a bigger hit than in either its 1990s financial crisis or in the 2008 banking crash. 

Magdalena Andersson, the finance minister, nonetheless welcomed the figures at a press conference following the announcement.   

"It's a historic fall, but, at the same time, less than in many other countries, and actually less than I was expecting back in June," she said. 

Sweden kept open primary and lower secondary schools, kindergartens, restaurants, bars offices and shops throughout the pandemic, although both the government and the Public Health Agency have insisted this was not motivated by a wish to protect the economy.

Robert Bergqvist, chief economist at the country's SEB Bank, said that the official figures confirmed trends his analysts had been seeing for some time.

Coronavirus Sweden Spotlight Chart - Cases default
Coronavirus Sweden Spotlight Chart - Cases default

"We could see that we had a substantial slowdown, but not of the same magnitude as we saw for other countries, and today we saw that it was correct to say, 'yes, Sweden will be affected, but the impact should be a bit less'."

He said there were three reasons for the milder hit.

"The first is this flexible attitude to lockdowns, the second is that we have a different composition to our economy - we're not very dependent on tourism - and the final reason is that the Nordic countries have a better digital infrastructure, which means we can move the economy into this digital world."

Sweden's neighbours Denmark and Norway, which have yet to publish GDP figures for the second quarter, both imposed much more thoroughgoing lockdowns, but are, according to many forecasts, still expected to see a slightly lower fall in GDP than Sweden, largely because of Sweden's substantial iron ore, steel and forestry industries. 

A succession of Swedish companies have over the past three weeks reported better profits for the second quarter than expected, while Handelsbanken, which serves many small businesses in the country, has said the number of bankruptcies and bad loans it is seeing remains low.

Mr Bergqvist said Swedish business leaders he spoke to were "optimistic". 

"They are saying that they are surprised by the quick recovery in demand," he said. "We still have unutilised resources in the Swedish economy, but we have started the recovery, that is very obvious. The big question right now is how strong this recovery is and also, whether it is sustainable."