Swedish GDP Set to Trounce Euro Zone, U.S. and Even Top Nordics

(Bloomberg) -- It seems increasingly clear that Sweden will suffer a much milder recession than both the euro zone and the U.S. But a fresh analysis published on Tuesday shows Sweden will fare better even than its Nordic peers this year and next.

Danske Bank is the latest forecaster to predict a softer crisis in the Nordic region than in the rest of Europe. And in its latest outlook, the bank now expects the Swedish economy to face a smaller contraction in 2020 and a higher growth rate in 2021 than in the rest of Scandinavia and Finland.

Sweden's 3.3% GDP decline this year compares with the 8.3% slump Danske sees in the euro zone, and the 4.3% contraction it predicts for the U.S. The bank expects the U.K. economy to shrink by 5.8% this year.

Danske Chief Economist Las Olsen says there is “no single factor behind” Sweden's performance.

“There's been a lot of talk about Sweden having a milder lockdown than the other Nordic countries” during the coronavirus pandemic, Olsen said in an interview in Copenhagen. “You'd expect Sweden's economic performance to be way better, but in reality what we see is that the Swedish performance is very close to what we see in the other Nordic countries.”

While keeping shops, restaurants and bars open has helped support Swedish consumer spending, that's only part of the story.

Read more: Swedish Covid Plan No Economic Game Changer, Forecasts Show

“Swedish companies have shown that they can bounce back quickly from a crisis, like they did after the financial crisis.” Olsen said. “This shows that Sweden has a very competitive economy.”

Having a flexible exchange rate regime also helps.

A strong euro has made life more difficult for exporters in Finland and Denmark, whose currency is pegged to the European single currency, Olsen said.

©2020 Bloomberg L.P.