External demand to constrain Sweden’s recovery

While there are welcome signs that Sweden has reaped some benefits from its light-touch lockdown, the economy will be constrained by the recovery in the rest of the continent given its dependence on external demand. Next week, Swedish inflation data are likely to show that the core rate fell further below the Riksbank’s 2.0% target in April, and we expect Denmark’s comparatively early lockdown to translate into a chunky 4% q/q fall in GDP when data are released on Friday.