Sweden, which avoided a lockdown at the height of the Covid-19 pandemic, saw its economy shrink 8.6% between April and June compared to the previous three months.
The Swedish Bureau of Statistics’ flash estimate indicated that the country had done better than other EU countries which had taken more stringent measures.
However, it was still the biggest quarterly drop in at least 40 years.
The European Union experienced a contraction of 11.9% for the same period.
Individual countries did even worse, with Spain shrinking 18.5%, while the French and Italian economies shrank 13.8% and 12.4% respectively.
The Swedish economy is doing better than other European countries
% change in quarterly GDP
“The decline in GDP is the largest in a single quarter for the period 1980 and beyond,” Statistics Sweden said.
“This is, as expected, a dramatic slowdown. But compared to other countries it is considerably better, for example if you compare to southern Europe, ”said Torbjorn Isaksson, chief analyst at Nordea bank.
- Has Sweden’s coronavirus strategy succeeded or failed?
Sweden has relied heavily on voluntary social distancing guidelines since the start of the pandemic, including working from home when possible and avoiding public transport.
Although companies have largely continued to operate in Sweden, the country’s economy is heavily dependent on exports, which have suffered from lack of demand from abroad.
A sign of a vulnerable economy
Authorities here have always said the country’s Covid-19 strategy was not designed to protect the economy. They stressed that the aim was to introduce sustainable and long-term measures.
But the government hoped that keeping the society more open would help limit job losses and lessen the impact on businesses.
The latest figures show just how vulnerable Sweden is to global economic changes. Like other Scandinavian countries, it has a small open economy that depends on international trade.
The results also suggest that while the company remains more open than in other parts of Europe, many Swedes have still chosen to stay away from shops, restaurants and gyms.
Recent opinion polls have suggested a decline in confidence in the minority government’s handling of the pandemic. If the economy continues to deteriorate, there could be more heated national debates over the decision not to lock in and the resulting high early death toll.
But given the rapid decline in daily deaths recorded since July, supporters of the controversial strategy hope that the measures taken here will help ensure long-term stability.
Despite the contraction, Sweden is not yet in a recession, as the first quarter saw growth of 0.1%.
An economy is generally considered to be in recession if it contracts for two consecutive quarters.
Various forecasts predict that the Swedish economy will contract further by around 5% this year.
This is less than in other countries hard hit by Covid-19, such as Italy, Spain and the UK, but still similar to the rest of Scandinavia.
Sweden’s unemployment rate of 9% remains the highest of the Nordic countries, down from 7.1% in March.