Swedish households are facing financial challenges as they grapple with higher costs and lower real wages, leading to a reduction in their bank account balances and borrowing activities. According to recent statistics released by the Swedish Central Bureau of Statistics (SCB), deposits into bank accounts have been consistently negative for two consecutive quarters, a trend not previously observed in the country’s financial records.
During the first quarter of 2023, household liquid savings reached 45 billion SEK, showing an increase of 23 billion SEK compared to the same period the previous year. This growth was partially driven by the injection of 17 billion SEK in the form of electricity support payments directly into households’ bank accounts. However, the prevailing high inflation rates, resulting in lower real wages and higher interest rates, have significantly impacted both households’ inclination to borrow and their bank account balances.
The sluggish growth rates of loans and bank account balances are evident in the data. In the first quarter of 2023, the annual growth rate for loans stood at 2.5%, marking the lowest rate in the available time series. Similarly, the growth rate for bank account balances was 3.9%, the lowest observed since the beginning of 2010.
The declining household debt levels can be seen in the ratio of household debt to GDP. Although nominal GDP has experienced relatively strong growth since the onset of the high inflation period, this has contributed to a decrease in the debt-to-income ratio for households.
Additionally, the government’s debt-to-GDP ratio has also decreased, primarily due to the winding down of COVID-19 support measures and the implementation of relatively cautious fiscal policies, which have been influenced by inflationary pressures.
Another notable trend is the net withdrawals from household bank accounts for the second consecutive quarter. In the first quarter of 2023, households invested approximately 7 billion SEK in listed shares and 16 billion SEK in fund units. Meanwhile, bank deposits witnessed negative growth, with a total of -11 billion SEK, indicating a significant decrease of 67 billion SEK compared to the corresponding period in the previous year.
At the end of the first quarter, households’ total debt reached 5,214 billion SEK, reflecting an annual growth rate of 2.5%. Net borrowing by households during the same period amounted to 7 billion SEK, representing a decrease of 62 billion SEK compared to the previous year.
Overall, Swedish households are facing financial pressures, characterized by reduced bank account balances, decreased borrowing activities, and negative growth in bank deposits. These trends are influenced by factors such as higher costs, lower real wages, and the prevailing inflationary environment.