Sweden Faces Rising Business Costs Amid Currency Drop and Raw Material Price Hikes

Recent economic data from Sweden reveals a concerning trend of rising costs for businesses driven by multiple factors, notably the depreciation of the Swedish Krona and increasing prices for raw materials.

According to Swedbank's latest Purchasing Managers Index (PMI) report, Sweden’s economic activity expanded in August beyond historical averages. However, more than half of the surveyed companies—52%—reported purchasing costs higher than anticipated. These cost increases stem largely from a roughly 10% weakening of the Krona against the Euro and Dollar since the start of the year, making imports more expensive. Additionally, rising global demand amid economic recovery, geopolitical tensions driving up oil prices, and supply chain issues have inflated prices for plastics, metals, and electronic components.

Companies are responding by seeking closer suppliers, alternative materials, and may pass on additional expenses to consumers, risking price hikes in essentials like food and gasoline despite recent government tax reliefs.

Swedbank economist Jörgen Kennemar anticipates the Swedish central bank (Riksbank) will raise interest rates twice soon, the first increase expected in November, to combat inflationary pressures.

Meanwhile, government measures to support economic transition, such as the electric vehicle (EV) subsidy, reveal mixed outcomes. The program has received over 21,000 applications for monthly payments of 1,300 SEK and one-time grants of 18,000 SEK for low-income households purchasing or leasing EVs. Yet only about half the applications have been approved. Many denials stem from income limits—households earning above 80% of average income are ineligible—and geographic restrictions favoring rural areas. This has drawn criticism from industry representatives urging broader inclusion of smaller cities.

The EV subsidy, jointly funded by the EU’s social climate fund (75%) and the Swedish state (25%), also covers used EVs, with notable interest in this segment amid falling fuel prices.

These economic challenges highlight the pressures Swedish businesses face in coping with cost escalations and underline government efforts to support sustainable transitions despite eligibility hurdles and regional disparities.