Nordic tourism that comes to the south of Gran Canaria in winter 2023 will be poorer. Scandinavian currencies have been losing since the beginning of the year against. The problems of the Norwegian krone are not isolated. Swedes are also struggling with currency depreciation, which is exacerbated by the state of the local real estate market.
In Norway, the euro has appreciated by 13,33% against the Norwegian krone, while the CPI of the Scandinavian country increased by 6,7% during the month of May. Therefore, purchasing power has improved by 6,63%. If the exchange rate of the community currency was set at 10,31 crowns at the beginning of last summer, it is now at 11,71 crowns.
The Swedish government raised its forecast for the Nordic country's economy for this year in 2023, while lowering growth expectations for 2024. The government predicted that GDP would decline by 0,4% in 2023, compared to a previous expectation of a decline of 1,0%, and would grow 0,8% next year, compared to the 1,2% seen previously. It forecast headline inflation of 5,8% this year and 2,4% in 2024 versus 5,9% and 2,2%, respectively, seen in April.
The economic recession in Sweden this year will be a little deeper than initially thought. GDP is expected to contract 1,0% versus December's forecast of a 0,7% drop, the government said in a forecast delivered with its spring budget bill. Headline inflation in 2023 will be seen at 5,9% this year compared to 6,0% seen in December.
The Swedish krona is at its lowest level in years against the euro because Sweden has one of the most dysfunctional housing markets, the housing situation is pushing the country to the brink of recession. In 2022 alone, the Swedish krona lost more than 15% against the US dollar. For the Nordics of Sweden and Norway, the euro is more expensive than ever. During the 2009 financial crisis, one euro temporarily cost 11,64. Today it costs 11,80. In May 2022, the US dollar was 9,76, now it is 10,80 SEK.
One possible explanation is that the risk associated with mortgage lending in the Swedish real estate market has led foreign investors to reduce their exposure in Sweden, which would contribute to weakening the krona. The deepening recession in the national real estate market puts pressure on the national currency. According to Oxford Economics, it is one of the most threatened markets, along with Canada and New Zealand. The probability of an accident is now greater than 50%. For comparison, in the US the risk was estimated at 35%. Furthermore, last year Sweden was the only country in Europe whose GDP fell significantly in the last quarter of 2023.
