Swedish Government Cuts 2014 GDP Forecast on Strong Krona

Sweden has cut down the economic growth forecast for next year as the major currency of the country; Krona is pretty strong at this point of time, adding to the effect of the debt crisis in Europe for undermining the demand for the exports. Sweden is the largest Nordic economy and it is expected to expand by 2.2% in 2014. Incidentally, on last December, estimation was done stating that the economy will expand by 3% in 2014. The new forecast was released by Anders Borg, the Finance Minister of Sweden. When it comes to 2013, the Gross Domestic Product of Sweden is expected to increase by 1.2%. Incidentally, in last year, the Swedish economy grew by 0.8%, as far as the latest official figures released are concerned.

According to Borg, the current crisis in Europe is serious situation. He added that such a crisis in the region means a slow and protracted recovery for Sweden, be in in 2013 or 2014. Incidentally, when it comes to the credit rating, Sweden is rated as AAA. The country emerged as a haven from the last year’s debt crisis in Europe. Krona, in the meantime, has appreciated more than most of the developed world peers over the last 12 months, thereby hurting the exporters big time.

In the last 12 months, Krona has advanced by 7.9%, if compared with a basket of the 9 other developed market currencies. On the other hand, if Krona is compared with Euro, the former has jumped up by 6% during the same time period. On today, Krona, however declined by 0.4% against Euro and is currently trading at 8.3512 per Euro. Against USD, Krona has tumbled by 0.6% and is currently at 6.3938 per USD. When it comes to the yield on the benchmark 2-year Swedish notes, the same was more or less unchanged at 0.971%. On the other hand, the 10-year yield went down by half a basis point to get to 1.68%.

It is expected that the Prime Minister of Sweden Fredrik Reinfeldt will be posting a budget deficit in both 2013 and 2014, as stated by Borg. The shortfall is expected to reach to 1.6% of GDP in 2013; however, the same may narrow down to 1% in 2014. The budget is expected to come to a balance in 2015, as mentioned by Borg.

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