Swedish economy shrank in 2023 as housing investment slumped

Credit: REUTERS/Ints Kalnins

GDP shrank 0.2% in 2023

Biggest impact from falling housing investment

Analysts see sluggish growth in 2024

Adds analyst comment in paragraph 10 and 11, currency reaction

STOCKHOLM, Feb 29 (Reuters) - Sweden's economy shrank 0.2% in 2023 versus the previous year, hit by inflation and higher interest rates, data from the Statistics Office showed on Thursday.

In the fourth quarter, the economy shrank 0.2% versus the same period in 2022 and fell 0.1% from the previous three months. It was the third quarter in a row gross domestic product (GDP) declined on a quarterly basis.

The biggest impact was from falling investment and rising services imports, the Statistics Office said, adding household consumption rose after five straight quarters of decline.

Preliminary data had shown GDP expanding 0.1% quarter on quarter and unchanged from the same period in 2022.

The Swedish crown was slightly stronger after the data. EURSEK=

Many analysts expect growth to remain sluggish, at least for the first half of this year.

The pace of inflation has dropped significantly after peaking at over 10%, but the central bank is not expected to start cutting interest rates until mid-year - or later.

Even then it is likely to proceed cautiously. 0#RIBA=

After experiencing declining real wages over the last couple of years, households are also being careful with their cash, while housing starts are expected to decline further, dropping to levels not seen since Sweden's domestic economic crash in the early 1990s.

"We expect that the prospect of lower rates and rising real disposable incomes should ... contribute to a pickup in economic activity in the second half of 2024," Swedbank said in a note.

"Our view is that the Riksbank will start cutting rates in June."

(Reporting by Simon Johnson, editing by Stine Jacobsen and Sharon Singleton)

((simon.c.johnson@thomsonreuters.com; +46 70 721 1045; Reuters Messaging: simon.c.johnson.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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