Sweden Faces Rising Household Debt and Data Shortfalls Hindering Economic Policy

Household debt in Sweden has surged significantly, with nearly 450,000 Swedes registered as indebted to Kronofogden, the Swedish enforcement authority. The total household debt has reached 154 billion kronor, marking a 76 percent increase over the past five years. This rapid escalation has prompted growing concerns among economists and policymakers about the financial vulnerabilities of Swedish households.

According to recent data, debts continue to rise at an alarming rate — approximately 44 million kronor added every day. Davor Vuleta, commenting on the trend, noted that just three to four years ago, household debt had recently passed the 100 billion kronor mark, emphasizing the speed of the increase.

Concurrently, the Riksbank has voiced serious concerns regarding the lack of comprehensive data necessary to accurately assess household economic conditions and inform monetary policy. Unlike neighboring countries like Denmark and Norway, Sweden lacks detailed statistics on household balance sheets, particularly regarding assets that households hold that could serve as buffers against financial shocks.

The Riksbank fears that incomplete data on both debts and assets results in an inaccurate understanding of the vulnerabilities within the population, complicating efforts to analyze the risks related to interest rate hikes and high debt levels. They stress the importance of household assets in mitigating risks from potential income losses or rising costs due to amortization requirements and mortgage limits.

While the government has proposed improving data collection on household debts through Statistics Sweden and the micro-simulation model Fasit, the Riksbank considers this step insufficient as it excludes asset data. The central bank advocates for broader access to such data, especially given its enhanced role in maintaining financial stability. Furthermore, it suggests well-designed sample data could reliably inform policies targeted at specific groups, such as first-time homebuyers, avoiding the pitfalls of overly large but unreliable samples.

In summary, Sweden is currently grappling with a swift rise in household indebtedness coupled with significant data gaps that hinder effective policy formulation. Addressing these deficiencies is critical to understanding economic risks and safeguarding financial stability going forward.