FI analysts: The recession may be deeper than expected

This spring, the trade association Svensk Inkasso sifted through a wave of debt collection cases during the autumn, a perception that was strengthened during the summer.

In June, almost half of 31 debt collection companies stated in a survey that more and more debtors were asking them for help.

- The number who need help with installment plans has increased during the second quarter of the year. This indicates that many find it difficult to settle their debts at once, says chairman Fredrik Engström.

- 55 percent of companies also make the assessment that households' ability to pay decreased during the year, based on contact with the indebted.

In a report from last year, Finansinspektionen stated that every third Swede who took out a new consumer loan in 2019, ie a loan for private consumption that is not a mortgage, would find it difficult to pay the bills in the event of sudden unemployment. At the same time, unemployment is expected to rise to 11 percent until next year, according to the Swedish Public Employment Service.

The individual problem can in the long run mean problems for the whole society, according to Michael Andersson, analyst at Finansinspektionen.

- Unemployment can mean that the borrower gets problems that can end up with debt collection or the Enforcement Officer. But if people at the same time save heavily on expenses, it can worsen the recession after the corona pandemic, says Michael Andersson.

According to him, increased unemployment can create a kind of vicious spiral in the economy, but probably not a financial crisis.

- There is a risk that a recession will be deeper. For individual consumers, it can be very difficult and ultimately affect Sweden's economic development, GDP and consumption figures.

Despite the gloomy forecast, Michael Andersson emphasizes that the difficulties will not affect everyone.

- Those who borrow often have a slightly better income than the population as a whole and are a little more robust. The now increased unemployment insurance fund will also make more people manage, he says.