Moody's See Little Lasting Impact From Riksbank Recapitalisation

Moody's affirmed Sweden's sovereign rating at Aaa (outlook stable) on Friday.

• Moody’s wrote "the fiscal deficit will rise to 1.3% of GDP in 2024 from 0.3% of GDP in 2023, primarily because of the legal requirement (under the Sveriges Riksbank Act, which entered into force in January 2023) to restore central bank equity"…"Moody's expects that the deficit will moderate to 0.5% of GDP in 2025 as this equity injection is a one-off".
• More broadly they noted that "public debt remains low and highly affordable, and the government's balance sheet retains significant shock-absorption capacity".
• "Although the Swedish economy is currently experiencing a cyclical economic downturn and difficulties in the real estate market, this does not signal a structural weakening in economic potential given Sweden's highly skilled labour force and significant investments in innovation".
• "The recovery in private consumption will be slow as households rebuild buffers and engage in precautionary spending to better withstand any future period of interest rate hikes. External demand from Sweden's largest trading partners will be contingent on the pace of the euro area's rebound in 2024".
• The main domestic risk to the outlook was cited as "increased distress in the commercial real estate sector as well as an even sharper housing market correction".