Sweden may not be a large country, but it is a quite significant export market for Polish entrepreneurs. Being present in this market can result in high margins and at the same time confirm the high quality of products or services. However, the Swedish currency reacts negatively to global economic turmoil. This means that a lack of safeguards against currency risk – one of the main challenges for exporters – can lead to significant losses.
The Swedish krona has lost almost a fifth of its value against the euro in the last two years. The weakening of this currency against the dollar is even more noticeable. Moreover, according to analysts, Sweden will likely end the year with a negative GDP growth rate for the first time since the pandemic. The International Monetary Fund (IMF) forecasts this indicator to fall by 0.7% y/y. Therefore, the country will likely be among the seven European Union countries (including Lithuania, Estonia, and Finland) that will experience a recession this year.
The weakening of the krona has affected trade with Sweden. Currency risk is one of the fundamental challenges for business. Factors such as the pandemic, war in Ukraine, and high inflation across Europe have caused the Swedish economy to suffer. This has induced the central bank to begin a cycle of interest rate hikes – there have already been eight since April 2022 and more may still be ahead.
In two years, the Swedish krona has weakened by about 20% against the euro, dollar and the złoty. As a result, goods imported into Sweden have become more expensive, reducing their competitiveness, although Poland’s export cooperation with Sweden remains significant. It’s important to remember that Sweden is a mature market, and Polish exporters have already been recognized for their high-quality products and services. This is a factor that largely determines business success in Sweden.
Exports to Sweden are dropping, but it’s not yet time to discourage this market. Despite the Swedish krona’s vulnerability, 2022 brought an increase in the export of goods from Poland to Sweden by 18.7% y/y, to PLN 43.5 billion. The sales slowdown to Sweden in 2023 is largely due to the turmoil in the Swedish economy. However, this does not pre-determine any halt in the potential for developing trade cooperation. Particularly, as the IMF predicts that inflation will decrease in 2024 (3.6% compared to 6.9% in 2023), Sweden will then return to economic growth (+0.6%).
The Swedish-Polish Chamber of Commerce regularly receives inquiries from Polish entities interested in entering the Swedish market. Not only manufacturers of food products already well recognized in Sweden, but also companies looking for contractors in the machinery and equipment sector, and even advanced IT and AI services. Overall, patience and an in-depth knowledge of the specific market segment, potential customer needs, competitiveness, and the ability to reach decision-makers in companies that may be interested in cooperation are essential for developing cooperation regardless of the sector.
Ebury experts point out that recommendations, especially in Sweden, can play a crucial role in establishing new business relationships. Polish entrepreneurs considering trade exchange with Swedish partners should pay particular attention to the issue of financial settlements. Ignoring currency risk with the significant volatility of the Swedish krona’s value could result in a significant reduction or total loss of the exporter’s margin or expose the importer to higher costs.
An alternative might be solutions proposed daily by Ebury. According to them, the Swedish market is promising enough to justify setting up an office in Stockholm. Thanks to this, Polish entrepreneurs can open local accounts in Swedish krona, and entities from Sweden can open accounts in złotys. The economic slowdown will surely force Polish entrepreneurs to make savings. These can be found in eliminating double currency exchange. Winning contracts, partners, and recommendations in Sweden, as well as the ability to settle debts in local currencies, may open the way for Polish companies to other markets in Northern Europe – especially as among Sweden’s most important export partners, alongside Germany, are Denmark, Norway, Finland, and the Netherlands.
