Successfully investing in Sweden


last updated on 21 June 2022 | reading time approx. 3 minutes




How do you assess the current economic situation in Sweden?

The current unstable international situation has a major impact on the economic situation and its prospects in Sweden. Economic growth has slowed down due to war in the Ukraine, but it can be assumed that it will remain above the ten-year average.
After strong growth of gross domestic product (GDP) of almost 5 percent in 2021, Sweden's economy is retur­ning to pre-corona levels and real GDP growth of around 3 percent is expected in 2022. Main reason for cautious optimism is the Russian invasion of Ukraine, the global consequences of the crisis and the associated uncertainty of economic development.
Unlike in neighboring Scandinavian countries, unemployment in Sweden remains above pre-pandemic levels. Mining, service providers, trade and the hospitality industry are particularly affected. Nevertheless, a steady decline in unemployment is to be expected.
Inflation, which was moderate until autumn 2021, picked up significantly at the end of 2021. According to the latest forecast, inflation for 2022 as a whole is expected to be 5.7 percent, almost three times the inflation target of the central bank (Riksbank). In the short and medium term, this will result in changes in consumer behavior and investments will be more cautious. The Riksbank does not plan to raise interest rates for the time being. However, if inflationary pressures do not ease in the second half of the year as hoped, attitude could change.


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

Sweden is a growing market with great development potential, especially in the areas of environment, auto­ma­tion and digitization. However, the current investment climate is strongly dependent on the further development of the Ukraine war and the global economic situation and outlook.
Should the Swedish central bank (Riskbank) raise interest rates due to the significant increase in inflation, this would dampen Swedish companies' willingness to invest. The uncertain global economic situation, the shortage of skilled workers and supply chain problems are already leading to cautious planning. Although investment expenditures of the manufacturing industry increased in 2021, important sectors such as energy and water supply, logistics and trade spent significantly less than in 2020. Overall, industrial investments fell by 2 percent in 2021.
The outlook for 2022 is slightly negative. Global and national uncertainties make it difficult to assess economic development in 2023 and make investment decisions difficult.
According to a survey conducted by the National Statistical Office (SBC) at the end of 2021, manufacturers of intermediate and durable goods were particularly cautious. However, motor vehicle, chemical, furniture and beverage producers expect above-average opportunities and it is expected that machine purchases will remain more stable than total investments.
In recent years, automation, digitization and research & development have developed rapidly. Swedish com­pa­nies are market leaders in the field of information and communication technology. These sectors are still extre­mely promising. Sustainability continues to be a top priority and Sweden is well positioned in the field of renewable technologies. Industrial processes are becoming more and more electrified and production capaci­ties are being increased accordingly.


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

Sweden is the largest market economy in Northern Europe with rapid population growth and acting as a bridge to the other Nordic countries. Financial investments are considered safe thanks to the low national debt, the R&D sector is strong, administration is efficient and the highly developed cluster landscape makes it easy to find business partners. Sweden and Germany are traditionally closely intertwined. Common future goals provide a good basis for cooperation and there is great synergy potential.
From a German point of view, entering the Swedish market can be challenging at the same time. For example, despite the harmonization of sales tax law in the EU, the Swedish taxation system is relatively complicated and there are major national differences. As an entrepreneur, it is not so easy to keep track of all the different tax regulations in Sweden and Germany. The rigid legal situation on the labor market, which makes layoffs almost impossible, discourages many employers from creating new jobs. In addition, labor costs are among the highest in Europe.
Sweden is known for its non-hierarchical corporate culture, which is geared towards consensus, dialogue and cooperation. Nevertheless, conflicts can arise when different values collide when it comes to decisionmaking or management style. While in Germany the direction is often clearly specified, in Sweden proposals are discussed in detail and the decisionmaking processes are sometimes long due to the culture of consensus.


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

Sweden recognized the benefits of wind energy at an early stage and is expanding it further. Water and wind power already account for more than fifty percent of electricity generation. GE Renewable Energy and the independent asset manager Luxcara are building 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 begun, with the installation of the first wind turbines started in July 2021. The project, with its Kallamossen and Djupdal subparks, 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 percent share of wind power as of today. With this project, electricity production will be mar­ke­ted under a longterm 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 economic outlook is slightly gloomy due to the current international situation. External factors such as the inflation-driven development of raw material and energy prices, the continuation of the global transport and supply bottlenecks, the development of the global financial markets and the prospects for the global economy in 2023 play a major role here. Internally, the upcoming parliamentary elections in September 2022 and the policies of the new Swedish government represent a certain uncertainty factor.
The currently rising inflation is leading to a significant deterioration in purchasing power and consumer senti­ment. According to the monthly survey by the Swedish Economic Institute, consumer confidence fell in March 2022 to its lowest level since the 2009 financial crisis. The timing for major purchases and investments is rather bad.
Nevertheless, the expected increase in consumption of three percent for 2022 offers opportunities. Service providers in particular should benefit from the backlog demand in tourism and leisure that has built up during the two years of the pandemic.
As far as foreign trade is concerned, it is expected that the development will return to a normal level. Although the momentum was significantly higher in 2021, Swedish imports and exports are each expected to grow by almost five percent.


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Lars-Göran Larsson


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