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The slowdown in the Swedish economy does not mean that a recession is upon us. But many can happen and there are several clouds of worry.
– A difficult conflict or a very intense trade conflict, for example: things can get worse, says Ylva Hedén Westerdahl, director of forecasts for NIER.
Nasdaq OMX Stockholm. Stock Photography.
Here, a sharp decline would affect the real estate market, banks and employment.
Price down
According to the National Institute of Economic Research, a fierce Brexit and intensified trade war are the main concerns.
A recession of this type mainly affects Swedish exports and has no direct impact on the housing market. However, this may indirectly lead to lower housing prices if wage trends in society stagnate and many people lose their jobs.
Which in turn causes the economy in an even worse situation.
– When house prices fall, households feel poorer, then reduce their consumption and start saving more, says Ylva Hedén Westerdahl, director of forecasts at the National Institute for Economic Research.
The wide range of newly built homes expected to enter the market is a cloud of concern. A factor that is already making economists nervous.
– The question is how will they be sold? An oversupply means that investment in housing and prices could fall even further.
Banking sector in crisis
The position of banks in a recession depends on the origin of the crisis, its extent and the degree of uncertainty surrounding the banks' loans.
John Hassler, professor of economics, says that Swedish households have good margins and that it is the commercial property owners that could become a concern if many of them go bankrupt.
– That's the part of the credit that may be a little more uncertain, he says.
In the worst case, a severe recession can lead to an erosion of confidence in the sector and bank loan problems.
– Then we can not move to investment projects and reasonable households. The blood circulation in the system stops and it is really serious.
If the banks go bankrupt, they will cause the entire economy. And then the only way out is that the state intervenes and issues bank guarantees, says Hassler, pointing out that he is happy that Sweden has adopted a responsible fiscal policy in the past. Last 20 to 25 years.
– If we had the same level of debt as in France and Italy, we would have been smoked.
Mass layoffs
Economists agree more or less to say that the next recession will be caused by external disruptions.
What we see before, is that China, for example, is suffering from a financial crisis, that some parts of the eurozone are collapsing or that the trade war between the states United States and China intensify.
Something that aggravates the demand for Swedish exports.
"It will be noticed first and then the question is whether these industries, such as Scania and the Swedish steel industry, will want to keep their workforce," said Hassler.
– This was during the financial crisis, but not during the crisis of the 90s, when companies felt that they were not competitive enough.
Mass layoffs often make waves and the people most affected by high unemployment are those who are already far from the labor market.
– People with low levels of education and foreign origin have struggled to find a job, even in times of strong expansion, and the recession is of course much worse for them.
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