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Successfully investing in Sweden


last updated on 19 May 2021 | reading time approx. 3 minutes




How do you assess the current economic situation in Sweden?

The Swedish eco­nomy got over the first corona year bet­ter than feared in spring 2020. Ac­cord­ing to pre­lim­in­ary es­tim­ates by the Swedish stat­ist­ics of­fice SCB, gross do­mest­ic product (GDP) fell by 2.8 per cent in 2020 com­pared to the pre­vi­ous year. While many European coun­tries went in­to strict lock­downs, life in Sweden re­mained largely nor­mal. Factor­ies, of­fices, shops and res­taur­ants were al­lowed to re­main open with cer­tain re­stric­tions. In ad­di­tion, the re­ces­sion was mit­ig­ated by strong gov­ern­ment­al sup­port meas­ures. The re­l­at­ively small hos­pit­al­ity sec­tor, the large ex­port sec­tor and the high de­gree of di­git­al­isa­tion that fa­cil­it­ates work­ing in the home of­fice, have had a pos­it­ive im­pact and Sweden is do­ing reas­on­ably well des­pite the pan­dem­ic.

Apart from the first three months of the pan­dem­ic, the num­ber of bank­ruptcies in al­most the en­tire year 2020 was well be­low the pre­vi­ous year's fig­ure – not least thanks to ex­tens­ive aid meas­ures. The un­em­ploy­ment rate rose to 8.2 per cent in 2020. It is fore­cast to rise to 9 per cent in 2021 and to de­cline only slowly there­after.


How would you describe the investment climate in Sweden? Which sectors offer the largest potential?

As a res­ult of the pan­dem­ic, many com­pan­ies ini­tially re­duced their in­vest­ment and jobs were cut. In its au­tumn fore­cast, the European Com­mis­sion es­tim­ated the fall in gross in­vest­ments in Sweden to 3.4 per cent in 2020. However, as plant clos­ures were largely avoided and de­mand from abroad con­tin­ued to grow, the in­dustry re­covered rap­idly from the slump in spring 2020.

Ac­cord­ing to the Na­tion­al Eco­nom­ic In­sti­tute, the volume of in­vest­ment could re­turn to pre-crisis levels as early as 2021 due to gov­ern­ment sup­port meas­ures and in­crease by up to 4 per cent com­pared to the pre­vi­ous year. There are be­ne­fits for ma­chine pur­chases, the pro­mo­tion of re­search and de­vel­op­ment, “green” gov­ern­ment in­vest­ment and nu­mer­ous pil­lars for the labor mar­ket, job starters and the growth of start-up and mi­cro-firms. On­line re­tail has sig­ni­fic­ant growth po­ten­tial. In view of the high level of “nor­mal­ity” (no shop clos­ures, no pro­duc­tion freezes), there is a cer­tain op­tim­ism and con­tin­ued high activ­ity in man­u­fac­tur­ing. Ex­port-de­pend­ent com­pan­ies have, of course, felt the slack in the glob­al eco­nomy. However, the res­ult­ing de­cline in in­vest­ment should not be over­stated, as mod­ern­isa­tions and in­vest­ments in grow­ing areas such as sus­tain­ab­il­ity, auto­ma­tion and di­git­al­isa­tion are be­ing pur­sued.


What challenges do German companies face during their business ventures into Sweden?

Des­pite the har­mon­isa­tion of VAT law in the EU, the Swedish tax sys­tem is con­sidered re­l­at­ively com­plic­ated and there are ma­jor na­tion­al dif­fer­ences. As an en­tre­pren­eur, keep­ing track of all the dif­fer­ent tax re­gimes in Sweden and Ger­many is not so easy. The ri­gid leg­al situ­ation in the labor mar­ket, which makes re­dund­an­cies al­most im­possible, dis­cour­ages many em­ploy­ers from cre­at­ing new jobs. In ad­di­tion, labor costs are among the highest in Europe.

Sweden is known for its little hier­arch­ic­al cor­por­ate cul­ture, which is geared to­wards con­sensus, dia­logue and co­oper­a­tion. Nev­er­the­less, when dif­fer­ent val­ues col­lide, con­flicts can arise with re­gard to de­cision-mak­ing or lead­er­ship. As a Ger­man en­tre­pren­eur in Sweden, it is im­port­ant to be aware of the small but subtle dif­fer­ences between the busi­ness cul­tures of the two coun­tries.


Europe's largest onshore wind farm is being built in northern Sweden. What opportunities does this present?

Sweden re­cog­nised the be­ne­fits of wind en­ergy at an early stage and is ex­pand­ing it fur­ther. GE Re­new­able En­ergy and the in­de­pend­ent as­set man­ager Lux­cara want to build the largest single wind farm in Europe, Önusberget wind farm in Sweden, with 137 tur­bines and a ca­pa­city of 753 MW, the world­wide biggest after the USA. In­fra­struc­ture work in north­ern Sweden has already be­gun, with the in­stall­a­tion of the first wind tur­bines sched­uled to start in Ju­ly 2021. The project, with its Kal­lam­ossen and Djup­dal sub-parks, aims to pro­duce enough elec­tri­city to power more than 200,000 Swedish house­holds per year and save al­most 1,000,000 tonnes of CO2 over its life­time. Sweden already has a 15 per cent share of wind power as of today. With this project, elec­tri­city pro­duc­tion will be mar­keted un­der a long-term con­tract for 25 years and will ex­pand Sweden's lead­ing po­s­i­tion in the field of wind power.


In your opinion, how will Sweden develop?

The com­bined sup­ply and de­mand shock caused by the pan­dem­ic led to a sharp de­cline in GDP in the second quarter of 2020. De­mand in­creased in the third quarter and sup­ply chains began to func­tion again. However, the next wave hit both Sweden and many oth­er coun­tries and the re­cov­ery was broken. While GDP has shrunk by about 3 per cent in 2020, fore­casters ex­pect growth to re­cov­er in 2021, but the eco­nomy will re­main in re­ces­sion. As an ex­port-de­pend­ent coun­try, Sweden's fu­ture re­cov­ery there­fore de­pends not only on the fur­ther course of the pan­dem­ic and vac­cine avail­ab­il­ity, but also on how the glob­al eco­nom­ic situ­ation and that of the EU's neigh­bor coun­tries will de­vel­op. Ac­cord­ing to pre­lim­in­ary data from the SCB, Swedish ex­ports de­creased by 5 per cent in 2020 com­pared to 2019, but the de­cline was much lower than for im­ports. In 2021, the pic­ture could re­verse and im­port growth may be trend­ing to­ward 6 per cent. If the Corona situ­ation is gradu­ally calm­ing down and the glob­al eco­nomy does not ex­per­i­ence an af­ter­shock, de­mand for Swedish products could in­crease by 3 to 5 per cent in 2021.


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Lars-Göran Larsson


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