Endless midsummer nights, stunning archipelagos and tasty meatballs, there are many reasons to go to Sweden for a holiday. In the summer of 2019, you can also snap up a real bargain. Cebr analysis of the Scandinavian currencies illustrates that UK workers will get the best deal should they convert their pounds into Swedish kronor. The Swedish krona has weakened significantly over the past 18 months, sliding from 11.3 SEK/GBP in January 2018 to 12.6 SEK/GBP this May. The 11% depreciation easily outstrips that of other Scandinavian currencies such as the Danish Krone (DKK) and Norwegian Krone (NKK) which weakened by around 2%. The weak Swedish krona has made the country a top holiday destination this summer. It’s not only the Swedish tourism sector that is booming due to the weak currency – the export industry has benefitted as well. Sweden’s exports rose by 0.8% in Q1 2019, comfortably exceeding most other European countries.
The weak krona is partly driven by the negative interest rate of -0.25% set by Riksbanken. The Swedish Central Bank has kept the interest rate extremely low over the past few years to boost consumption spending.
As a result, Sweden has enjoyed a strong export performance with a solid manufacturing and steel industry contributing to a positive trade balance over the last two decades. Despite decent export growth in Q1 of this year, the trade surplus is narrowing as demand for Swedish manufactured goods has weakened weighed down by trade uncertainties around the world, affecting China and the European markets in particular.
With that in mind, it is comforting to see that Sweden has been successful in expanding in other sectors and diversifying its economic base. The creative and digital industries in particular have been doing well. Stockholm has played an increasingly important part in the digital economy attracting entrepreneurs from all over the world contributing to Sweden’s Flat White Economy as previously noted by Cebr’s Deputy Chairman Douglas McWilliams. Being home to the second-highest number of billion dollar tech companies per capita after Silicon Valley1, Sweden seems well placed to play a leading role in the tech industry with a number of global leaders such as Spotify, Klara and iZettle. The companies not only benefit from a generous public safety net, good infrastructure and relatively low corporate taxes (22% vs. US’s 39%) but also from international talent that comes to Sweden. However, a further weakening of the Kronor would put this at risk as entrepreneurs from around the world will be discouraged to relocate to Sweden due to their lower savings and purchasing power abroad.
Swedish monetary policy usually follows the tone set by the European Central Bank. As such, Cebr expects interest rates to stay in negative territory at least until Q1 2020 and potentially longer if the EU economy continues to slow. This will be good news for tourists planning to visit the country. In the struggle for international tech talent, however, Swedish firms will have to try harder.
1: Semuels, A. 2017: Why does Sweden have so many start-ups? In The Atlantic https://www.theatlantic.com/business/archive/2017/09/sweden-startups/541413/
Source: Macrobond, Cebr analysis
Contact: Charlotte Cervin ccervin@cebr.com phone: 0207 324 2842 or 07923 671350