Prudent governmental policies are slowly healing a battered Swedish economy, yet, the recovery won’t be as swift as others. Sweden’s economy and exchange traded fund (ETF) may be doing better than expected, but how 2010 will go is up in the air.

The National Institute for Economic Research (NIER) expects the Swedish economy to contract 4.4% this year, but it will make a recovery, with a projected expansion of 2.7% in 2010 and 3.3% in 2011, according to RTTNews. The think tank attributes the turnaround to”expansionary fiscal and monetary policies, including tax cuts and low interest rates.” [Swedish ETF gets the support it needs.]

The Statistics Denmark posted better-than-expected figures, which revealed a 0.6% growth in GDP in the third quarter as compared to the second quarter, as stated in The Copenhagen Post Online. However, the economy took a rigorous beating in the first and second quarter and recovery will be sluggish compared to other recessions.

On the downside:

• Joblessness is forecast to rise: 8.5% in 2009, 10.1% in 2010 and 10.4% in 2011.
• Increases in hourly earnings will drop from 3.1% in 2009 to 2.3% in 2010 and to 2.2% in 2011.
• Inflation is projected to rise 0.5% next year and to increase 1.7% in 2010 after a contraction of 0.3% this year.
• The NIER also expects the Riksbank to raise rates to 0.75% in 2010 and to 1.75% in 2011. [Could Sweden see smoother sailing ahead?]

On the upside, the housing market reached its lowest point and the Danske Bank believes prices will begin to stabilize.

For more information on Sweden, visit our Sweden category.

• iShares MSCI Sweden Index (NYSEArca:EWD): up 56.1% year-to-date

Max Chen contributed to this article.

Tags: Europe, EWD, Global ETFs, Sweden