The Swedish Expected Default Frequency, at 2008 levels

The Expected Default Frequency indicator in Sweden fell to its lowest level since September 2008. Crédito y Caución forecast a 5% decline in Swedish insolvencies throughout 2010.
Analisis Credito y Caución
Madrid - 30-abr-2010

According to Statistics Sweden, seasonally adjusted GDP decreased 1.5% year-on-year in Q4 of 2009, after a 5% drop in the previous quarter. For the year as a whole, GDP decreased 4.4%, due to low investments and a poor export performance. Nevertheless, the economy has passed its low point, thanks to an expansionary fiscal policy and low interest rates: the Swedish central bank continues its strategy of keeping the repo interest rate low, at 0.25%.

Although many Swedish companies are still facing low demand, and some sectors still suffer from previous over-production, there is now much more optimism than in 2009, as many companies rode the crisis well and continued to show reasonable profits. The only exception to this positive picture is the domestic automotive industry and its suppliers, who face tough times ahead. But, despite lending to businesses continuing to decrease, with some smaller and/or newly established companies facing problems accessing loans, Crédito y Caución does not foresee an overall deterioration in the credit situation.

The NIER forecasts 2.7% growth in 2010, driven mainly by household and government consumption. Exports will increase, although dampened somewhat by the krona exchange rate. Because of the continuing recovery, a small increase in the repo interest rate is expected in the summer or early autumn.

Decreasing insolvencies in 2010

For the whole of 2009, corporate insolvencies increased 25% - to 7,900 - with retail, rental, wholesale and restaurants suffering most. However, in January 2010, the Expected Default Frequency [EDF] indicator for listed companies in Sweden fell 21 basis points, to 83: its lowest level since September 2008. In the same month, overall corporate insolvencies decreased 14% year-on-year, and Crédito y Caución forecast a 5% decline in insolvencies throughout 2010 as the economic recovery continues.


Overall, the private housing industry had a surprisingly good year in 2009, with high order books, low interests and a house market that still benefited from increased prices. This will continue into 2010, as, in February, the forecast for newly built small houses was increased from 7,000 to 7,500 for the year. DIY markets are still doing well, due to the continuation of the tax reduction programme [ROT].


After a slight recovery in 2009, prospects for the sawmill industry are rather uncertain. Currently, the overall order situation remains satisfactory but, in the course of 2010, demand could decrease while material prices are expected to increase. In addition, the appreciation of the Swedish krona is not helping this industry. 


Overall, the retail sector grew 3.6% in 2009 compared to 2008, due to tax decreases, low interest rates, and a well-performing stock market. In January 2010 retail sales of consumables continued to increase [3.6% year-on-year], while sales of durables rose by as much as 6.3%. But theres a mixed picture across the subsectors, with furniture, electronics and the construction trade all showing weak performance in the last couple of months.

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