Swedish investor weighs in on financial risks in 2023

What will 2023 be like? What will happen to inflation? How will the war in Ukraine affect the economy going forward? Here's what Swedish investor Christer Gardell, founder and CEO of the fund Cevian Capital, has to say.

Swedish investor Christer Gardell, CEO of Cevian Capital, discusses what to expect in 2023 - in terms of financial risks. Photo by Philip Myrtorp / Unsplash

Looking back on 2022, Gardell believes that the stock market has gotten a little better at taking a beating – compared to two decades ago.

“Once we were out of the pandemic, inflation, energy prices, and a war in the immediate area hit. That is quite a lot of uncertainty at once. If this had happened 20 years ago, there would have been total panic in the stock market. So, the stock market has gotten a little better, I think, at taking a beating.

“During all the strange years when money has cost nothing, quite a few bubbles have been inflated in the system, strange companies that earn nothing and barely have any operations still valued in the billions… And we got strange phenomena like cryptocurrencies and these SPAC companies (special purpose acquisition companies)… Many of these bubbles have been scrubbed away in 2022,” Gardell said.

What will 2023 look like?

Gardell thinks 2023 might start off quite rocky.

“It could be quite dramatic at the beginning, I think. But the recession will surely go away in 2023. It is uncertain how the war in Ukraine will develop… If it escalates, it is a bad scenario, but if there were to be peace, it is clear that it would be favourable for the stock market.

“Those who should be worried are those who had borrowed heavily during the happy days when money was free – the real estate sector and private equity (venture capital companies), as well as telecom companies.

“Other companies that will have a hard time are companies close to consumers. In Sweden, the interest rates hit people immediately, as most people have short-term and variable interest rate loans. Then you have the energy prices. They have a strong dampening effect on purchasing behaviour. It is probably impossible to raise consumer prices anymore, as customers have no money. If you raise the prices, you lose too much volume.”

Inflation changes

The investor believes that the key challenges related to inflation have already been solved.

“We had a whole generation that didn’t know what inflation and interest rates were. Now they know. Now they know that money costs money…

“We see how shipping prices have started to fall, and many raw material prices have also fallen. So, I think the inflation problem is actually solved. The central bank (Riksbank) does not need to intervene anymore,” he concluded.

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Denmark uses new method to collect debt from public

Last year saw Denmark’s public debt collection agency Gældsstyrelsen collect a record amount from people with debts to the state.

Denmark uses new method to collect debt from public

A total of 12.6 billion kroner was collected last year according to the agency, which is a part of the Danish Tax Authority (Skattestyrelsen).

A new and more efficient recovery system, termed PSRM, can be credited for the amount, the agency said in a statement.

The system allows the agency to deduct from debitors’ wages and tax rebates in order to clear the debt.

“We have created a collection with strong resources to recover the debt,” Gældsstyrelsen director Anne-Sofie Jensen said in the statement.

“With our new system and our many skilled workers we are moving step by step in the right direction towards bringing down debt to the state,” she said.

Last year the system saw the tax authority bring in 5.2 billion kroner in overdue repayments.

The amount was notably lower in 2020, when it reached 2.2 billion kroner.

“The annual result shows that we are succeeding with our core task,” Jensen said.

“We are recovering a lot of the debt that public creditors have failed to demand from members of the public and businesses before the debt was transferred to us,” she said.

“But we are also aware that there are still challenges we must overcome in the coming years so we keep our working gloves on,” she said.

The amount of debt recovered by the state has increased year-on-year since 2016.

However, the total owed by individuals and businesses has also increased during that period.

That debt was estimated at 152 billion kroner in total in 2022.