The weakened krona makes Sweden a cheap destination for tourists from countries with stronger currencies.
It creates jobs and growth. But it could also drive up prices for hotels, restaurants and entertainment in Sweden this summer.
It is positive for Swedish growth when foreign tourists with purchasing power come here. It creates jobs in the tourism industry and it pushes up the so-called tourist net, which has a positive effect on GDP.
But for Swedes who choose to spend their holidays at home – perhaps precisely because it looks expensive abroad as a result of the weakening krona – an increased flow of wealthy foreigners could have a negative effect. The foreign tourists create room for price increases on everything from entertainment to hotels, restaurants and domestic travel services.
”"There may be higher price pressure on hotels in Sweden than there otherwise would be, especially in the big cities. Such an effect may exist there. And in that case it will be visible in inflation and it may make it a little tougher for Swedish households to vacation at home," says Torbjörn Isaksson, chief analyst at Nordea.
”But I don't want to exaggerate that effect,” he adds.
Isaksson believes that there could be a small tourist effect on inflation as early as May. Eurovision in Malmö and Taylor Swift in Stockholm attracted many foreign visitors.
”"It could be a few tenths of a percentage point of inflation," he says.
Over a ten-year period, the krona has weakened significantly against most world currencies and lost value across the board – with the Norwegian krone being an exception.
Germans and French people have gained almost 30 percent more purchasing power in Sweden through the euro since May 2014. The Danes have followed suit, thanks to the Danish krone's fixed exchange rate against the euro.
British tourists have also received a boost – with a 23 percent appreciation of the pound against the krona in ten years.
For American tourists, the development is even more dramatic. The dollar has increased in value by 62 percent against the krona in ten years – of which 6 percent since the turn of the year. The dollar currently costs 10.70 kronor, which can be compared to just over 6.80 kronor ten years ago.
Swiss tourists are slightly below, with a currency appreciation of 59 percent in ten years – despite a slight weakening of 2.5 percent for the Swiss franc since the turn of the year.
”"What stands out is the Norwegian krone, which like the Swedish one has been weak. The Japanese yen has also been weak in the past year. Otherwise, the krone has weakened on a fairly broad front," says Isaksson.
Source: TT-DI.SE
