Sweden's economy grew by only half as much as earlier thought in the second quarter, pointing to further cuts in central bank borrowing costs, although it should still do better this year than the neighbouring euro zone where growth has come to a halt.
Recent figures have shown the Nordic economy is slowing after the crisis in the currency bloc impacted its vital export sector more profoundly than initially thought, somewhat tarnishing Sweden's reputation as a place to shelter from the economic storms. Many analysts had expected the second quarter growth reading to be revised lower, but the new data meant the central bank would likely keep cutting interest rates after a 25 basis point reduction last week to 1.25 percent.
"With this data it is reasonable to expect that markets start fully pricing in two rate cuts this year," said Michael Grahn, economist at Danske Markets. Prior to the release most analysts had expect only a single further cut this year. Gross domestic product rose 0.7 percent in the second quarter from the previous three months and 1.3 percent from a year earlier, the new estimates showed.
The figures were revised sharply down from a flash estimate in July which showed the economy growing 1.4 percent on the previous three month period and 2.3 percent over the year. "I think we are going to have ... on average a slightly negative growth rate in the next two quarters," said RBS chief analyst Par Magnusson, expecting full year growth of just 0.7 percent. The first quarter GDP figure was also revised down slightly.
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