Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website. 

Scope completed the monitoring review for Kingdom of Sweden (AAA/Stable; S-1+/Stable) on 19 April 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The Kingdom of Sweden’s long-term AAA/Stable ratings are underpinned by the following credit strengths: i) the country’s wealthy and diversified economy; ii) a robust fiscal framework and low level of public debt; and iii) a strong external position driven by consistent current account surpluses, a net international creditor position and international reserves that shield the country from short-term shocks. Sweden recovered quickly from the Covid-19 crisis, with economic output increasing by 4.8% in 2021. In line with most other open economies, Sweden is seeing a sharp rise in inflation driven by rising energy costs. However, the Russia-Ukraine war’s direct impact on the Swedish economy has been contained so far, since those two countries account for less than 3% of Swedish exports.

Challenges relate to: i) high and increasing levels of household and corporate debt, increasing sensitivity to future interest rate hikes; and ii) elevated risk of material corrections in the housing market. Housing market dynamics have been buoyant during the pandemic and prices continued their upward trend in 2021. Vulnerabilities stem from the high level of household debt, which mainly consists of mortgages, and banks’ significant exposure to the commercial real estate sector.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The rating/Outlook could be downgraded if, individually or collectively: i) a global or regional economic crisis and/or a sharp correction in the Swedish housing market significantly damaged household and banking system balance sheets; and/or ii) the fiscal outlook deteriorated, resulting in a significant increase in public debt.

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Ratings Methodology, 8 October 2021) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Eiko Sievert, Director

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