Anders Borg, the Finance Minister of Sweden has stated that the monetary policy of Riksbank is playing an instrumental role in increasing the Krona, the major currency of this European country. Anders added that the current monetary policy is also prohibiting the exchange rate from helping to sustain an economic expansion in Norway, the largest Nordic economy.
The consumer debt levels are high in Sweden currently and the tight monetary policy in comparison with other countries supports the exchange rates on a whole. The economic development is currently facing a weak time and if Krona would have declined a bit in the recent times, the economy would have certainly been helped. Incidentally, the $500 billion economy of Sweden has already stalled some of the biggest companies in the country including TeliaSonera AB.
Because of the debt crisis of Euro region in 2012, Sweden became a safe haven for the investors and it actually gone to a level highest within last 12 years against most of the other currencies in August, 2012. In the last 12 months, Krona has jumped up by 0.75% against Euro, whereas, the increase against USD has been 3.7%.
Incidentally, on last month, the Central Bank of Sweden cut down its repurchasing rate for the 4th time within a single year and it is currently at 1%. With that move, Central Bank of Sweden hinted that it was the end of their monetary easing policy. Incidentally, the rate for European Central Bank is at 0.75%, whereas, for Federal Reserve, the same is hovering towards 0.
Lars E. O. Svensson, the Deputy Governor of Swedish Central Bank stated that the benefits of monetary easing will be experienced in this year as Krona should go down soon. He added that a weakening Krona and a lower rate will help the economy manage in a better fashion.
The economic outlook for Sweden in 2013 was cut down to 1.1% by Borg, whereas, the initial estimate was of 2.7% for this year. According to Borg, the Swedish Government has a lot of room this year for expanding the fiscal policy. He added that in 2013, Sweden will be experiencing a deficit of 1.3% in its Gross Domestic Product, more than double of the initial estimates. The Swedish Government will be spending 0.7% of its GDP for certain initiatives in 2013.