Lingering concern over Greece’s finances has weighed on an exchange traded fund indexed to Sweden. The Swedish economy is expected to expand this year but will begin to slow, according to recent research.
iShares MSCI Sweden Index Fund (NYSEARCA:EWD) is down roughly 7% year to date.
Sweden’s National Institute of Economic Research (NIER) projected that GDP will grow a faster-than-expected 4.4% this year, as compared to its previous 4.2% estimate, according to RTTNews.
“Conditions for growth are significantly more favorable in Sweden than in most other OECD countries,” remarked the NIER, according to Reuters.
However, next year’s projections has been lowered to 2.9% from 3.1% due to slowing growth in household spending and inventory stockpiling. The NIER also stated that unemployment is dropping to 7.5% this year, 7.2% in 2012 and 6% by 2015; unemployment currently stands at 7.9%.
The think tank also believes rates will increase to 2.25% by year’s end and 3% by 2012 from the current 1.75%. The Riksbank expects to raise rates in the coming months, with the next rate hike due next month. Sweden’s consumer confidence dropped to 16.7 in June from 17.9 in May, which is in line with expectations and “implies that the Riksbank can stick to its scenario (rate path) in July,” commented Elisabet Kopelman, an analyst at SEB.
However, the institute opines that the economy won’t return to pre-crisis levels until 2014 and argues that the Central Bank continue with its expansionary policy, as stated by The Local.
“Our assessment is that we’re still in an economic slump where unemployment is higher than normal,” added the NIER. “Therefore there’s a need for stimulus, first from monetary policy but there is also some room for fiscal police stimulus.”
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iShares MSCI Sweden Index Fund
Max Chen contributed to this article.