Even Sweden starts to look a bit shakey

Championed as an economy which has effectively weathered the GFC, Sweden’s output is now starting to slow. Like Germany their economy is very export dependent and specialises in high-value manufacturing and therefore has been affected by the slowdown in both Europe and China.

50% of GDP is export related and because of the global downturn industrial production is down 5% this year although the strong Swedish Krona hasn’t helped matters. The Swedes have some concerning debt issues in that households have a debt-to-income ration of 149% – the Dutch rate is even higher 250% and the Danes are at 267% – see graph below. However the public sector debt is low and gross national debt is 37% of GDP. For the private sector the house prices have increased relative to incomes and rents and this is in a country with so much land and so little population ought to be a worry for policymakers. With unemployment on the rise households will find it harder to to pay off their debts and the banks might have to take some big losses.

Gross debt-to-income ratio of households % Source: http://epp.eurostat.ec.europa.eu

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