The trade war between the US and China could benefit the Swedish solar cell market as the industry has been pulled into the war. Last year, the US put tariffs of 30 per cent on imports of solar cells, which primarily hit China. And recently, the US announced that new tariffs of 10 per cent were planned for selected Chinese imported goods.
“According to market analysts, the American tariffs are already seeing large volumes being redirected and swarming into Europe,” says Johan Öhnell, chair of Solkompaniet, one of Sweden’s leading solar cell companies.
Risks to the global economy have increased over the summer, according to Finance Minister Magdalena Andersson, who is concerned over the escalating US-China trade war and the possibility of a hard Brexit on 31 October. Other risks include the Hong Kong protests, tension in the Strait of Hormuz and Germany’s struggling economy.
Ahead of next week’s presentation of the outlook for the Swedish economy, the minister has told the Svenska Dagbladet newspaper that the labour market remains exceptionally strong, even though unemployment has risen slightly. She does not see any sign of a recession but is prepared for a slowdown in the economy.
Nordea’s chief economist, Annika Winsth, shares the finance minister’s view that the global downturn has become evident over the summer, but she is unsure as to whether major macroeconomic events such as Brexit and the US-China trade war will trigger a global crisis. Winsth is concerned instead about an “us and them mentality”. “This trend is also evident on a global level. The Western world and the US against China, for example,” she says.
“I believe this trend has escalated over the summer. … The unrest in Hong Kong is one example. The escalated conflict between the US and Iran is another,” she adds.
The inflation rate according to the CPI with a fixed interest rate (CPIF) was 1.5% in July, reported Statistics Sweden on Wednesday. The outcome was marginally higher than analysts and the Riksbank had forecast.
Capital Economics believes the Swedish economy will teeter on the brink of a recession in the third quarter and domestic demand will weigh on inflation pressures. Due to falling capacity utilisation, inflation is likely to be well-below the Riksbank’s target of 2%, which will mean that the central bank will have to revise its interest rate path, says the economic research consultancy, which reiterates its forecast that the Swedish krona will weaken further to SEK 11 against the euro by year-end.
Swedish household saving as a percentage of disposable income is around 5%, according to Statistics Sweden, but Nordea believes the figure is misleading and that it is most likely around 2.5%. The bank is now warning of the consequences, saying households do not have a buffer in the event of a crisis.
Nordea chief analyst Torbjörn Isaksson blames the low level of saving on Sweden’s negative interest rates, indicating that monetary policy has been expansionary for far too long. “It was wrong of the Riksbank to lower interest rates to below zero in 2015 and to start buying government bonds in order to push down rates further,” he says.
In an interview with Bloomberg, Sampo, which owns a major stake in Nordea, believes that banks will eventually have to pass on negative interest rates to private customers. Sampo CEO Kari Stadigh has said he does not believe such a move would necessarily destroy retail banking. “People would actually then have to pay for their deposits, so actually it could even bring stability to the banking sector.”
Nordea, SEB, Handelsbanken and Swedbanken have all told Svenska Dagbladet, however, that they have no plans to pass on the negative rates.
Swedish Foreign Trade Minister Ann Linde (S) is not hiding her concern over the escalating trade war.
“There is a risk of a very dark autumn if everything goes wrong. There could be a no-deal Brexit in October, car tariffs in November, collapse of the WTO dispute settlement body in December... Add to that the trade war between the US and China if it develops globally,” she says.
The minister points out that an analysis from the WTO indicates that an escalating trade war could bring down global GDP by two per cent and world trade by 17 per cent. This can be compared to the global finance crisis which brought down GDP and trade volumes by 2.1 per cent and 12.4 per cent.
“There are 1.4 million jobs thanks to exports. That is every third job. If global trade falls, then it will unequivocally affect Sweden,” she says.
On the issue of US car tariffs, she says, “As soon as we meet American representatives, we bring up the issue of car tariffs, as it is so important for Sweden.”
Concern is growing over the world economy. With the risk of a hard Brexit and a trade war between the US and China, the Swedish economy is under threat. However Finance Minister Magdalena Andersson (S) considers there to be no need for tightening up.
“If it is the case that the economy is slowing, then that is not the time to implement large savings,” she says.
In a few weeks, the finance minister will present new forecasts for the Swedish economy at the government meeting at Harpsund. The forecast will form the basis for the budget that the government will negotiate with the Centre and Liberal parties.
Commenting on concerns that the global economy will affect the Swedish one, she says, “It has been our assessment for a while now that growth is slowing. We are now seeing how international development is affecting Sweden.”
She says it is too early to draw any conclusions about how the trade war between the US and China will affect Sweden ahead. “So far it has mostly affected the US and China and could even open up export opportunities for Swedish companies. However if there is a large scale trade war then of course it affects the entire world economy.”
She says that Sweden is well equipped for an economic dip with the lowest state debt since 1977.
She comments, “I have been criticised both for saving too little and saving too much. My assessment is that we have pursued a well-balanced policy.”
Brexit is worrying small Swedish businesses and many are not sufficiently prepared and have refrained from making investments because of the uncertainty. The Swedish Chamber of Commerce in London is now urging Swedish companies to act quickly.
CEO of the Chamber of Commerce Peter Sandberg says it is different for different industries but generally it is important to review distribution chains and whether you will have access to all products required.
“It is often about resources - how much you can prepare. However, you can safely say that most want a transition period and not a hard Brexit.”
He points out that smaller companies cannot always afford advice or long preparations, but instead have to wait to start the process once the exit is a fact.
A new report from the National Institute of Economic Research (NIER), released yesterday, shows that the Swedish economy is slowing faster than expected.
Trade wars, Brexit and the conflict around oil tankers in the Strait of Hormuz are contributing factors.
“The risk of the UK leaving the EU without a deal has increased since Boris Johnson became prime minister,” says Ylva Hedén Westerdahl, head of forecasting at NIER.
The labour force was expected to increase but instead fell by 0.2 per cent during the second quarter. Fewer investments were made within business and household consumption has not increased as much as earlier forecasts expected.
The NIER expects Sweden’s economy to grow by 1.5 per cent in 2019 and 1.3 per cent in 2020.
Ylva Hedén Westerdahl also says that there is no scope for the government to implement unfinanced reforms if the surplus target is to be met.
Swedish listed companies believe that growth will slow in the second half of 2019 and into 2020, according to a new survey carried out by PMP Marknadskonsult.
More Swedish listed companies have a less positive view of growth during the second half of the year than they had at the start of the year.
“I think the survey clearly shows that we are going towards an economic slowdown,” says Mikael Julher, CEO of PMP Marknadskonsult.
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