Sweden's "special path" offers no protection against a recession

The corona virus has also spread rapidly in Sweden. In combating the virus, however, the government of the Scandinavian country relies primarily on recommendations and the common sense of the citizens. Unlike in many other countries, strict initial restrictions were not imposed here. Sweden is taking a special path.

With this special path, the Swedish government cannot avoid a recession, but the economic downturn is unlikely to be as severe as in other countries. According to the Swedish Statistical Office's flash estimate, Sweden's economic output in Q1 shrank by "only" 0.3 per cent compared with the previous quarter. Compared with the southern European countries, where economic activity came to a virtual standstill at times, this is a very good result. Nevertheless, the downturn in the Swedish economy is likely to gain momentum significantly in the second quarter.

Even without an order to close stores, the retail trade in Sweden will probably suffer massive losses because consumers are very insecure. The national consumer climate index plummeted in April and was only slightly above its low point from the financial crisis. However, the small open economy is being hit particularly hard by the global

decline in demand and the resulting expected significant decrease in exports. The economic slump in Germany and other European countries as well as in the USA is likely to drag the Swedish economy into a deep recession in 2020.

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