"GDP contracted in the fourth quarter with a broad downturn in capital formation and household consumption," said Jessica Engdahl, head of section at the National Accounts Department, Statistics Sweden.
Compared with the previous quarter, gross fixed capital formation in the fourth quarter decreased by 0.8 percent, exports went down by 1.0 percent, imports down by 1.1 percent, and market production shrank by 1.3 percent.
Though the full year GDP of 2022 increased by 2.4 percent from last year, several major banks have given negative predictions of Sweden's GDP this year: Swedbank expected a decline of 1.3 percent, SEB expected it to shrink by 1.2 percent, and Nordea, more pessimistic, forecast a 2-percent decline.
The slowdown in economic activities also take a toll on households. Household final consumption decreased by 0.2 percent in the fourth quarter compared with the previous quarter, with decreased expenditure on furnishings and household equipment, food and consumption abroad mainly contributed to the downturn. Households' real disposable income decreased by 2.7 percent compared with the fourth quarter of 2021.
Last 2 quarters GDP. 4 EU Countries in recession. Within 6 weeks Germany, Austria, Sweden, Poland, Italy and Croatia will be in recession too pic.twitter.com/KYNeOepea7
"Households will have a tough time," Mattias Persson, chief economist at Swedbank, told Swedish Television. In his view, the Riksbank (Sweden's central bank) needs to act more than previously thought because "a very weak krona" was also to blame.
Persson said that Swedish households took considerably more of a beating than those in the rest of Europe and the U.S., due partly to the krona weakened by the inflation shock, and partly to the fact that Swedes are generally more indebted and more sensitive to interest rate increases.
"This in turn leads to the housing market in Sweden standing out as one of the hardest hit in the entire Western world right now," said Swedbank, forecasting housing prices to continue downward.
Earlier this month, the European Commission said in its Winter 2023 Economic Forecast that Swedish economy would be the worst performing in the European Union in 2023, with an estimated decline of 0.8 percent this year.