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Sweden 'will lose more jobs to Eastern Europe'

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12:37 CET+01:00
Jobs will continue to move from Sweden to lower cost countries in Eastern Europe, according to a new report from Föreningssparbanken.

Growth in the Baltic region, according to the bank's bi-annual Baltic Report, looks strong.

Economies in the Baltic region will grow on average by 2.9 percent in 2006, and 2.4 percent in 2007, But jobs are predicted to continue moving from Sweden to lower-income countries in Eastern Europe.

FSB Chief Economist Hubert Fromlet said it had been argued that the threat to Swedish jobs was exaggerated, and that there was even a trend that companies which had moved east were now returning to Sweden.

But Fromlet said on Thursday in fact the opposite is true.

"There is a tendency [in Sweden] to tone down the risks connected to globalization of the work force and the phenomenon of outsourcing or offshoring," he stated.

"According to our understanding, that is a completely premature conclusion. Outsourcing and offshoring will continue strongly."

The trend of companies returning to Sweden, according to Fromlet, has occurred mainly because of poor foreign investment planning and execution, and not by effects of globalization.

Swedish companies will continue to find it difficult to compete with Eastern European economies.

The average price in Estonia last year for an hour of work, including salary and payroll tax, was 41 kronor. In Sweden, the average was 215 kronor.

Despite healthy forecasts for the Baltic region, growth will be brought down by the German economy, which is expected to grow 1.5 percent in 2006 and only one percent next year.

Growth in Poland, the largest of the new EU members with 40 million inhabitants, looks more promising.

"Provided the government does not do something completely crazy, Poland could grow 3-5 percent annually," Fromlet said.

Russia will continue to capitalize on high energy prices. Surpluses in foreign exchange remain buoyant, and Russia currently has the fourth largest currency reserve among emerging economies.

But oil revenues cannot overcome the need for reforms, and according to the report, lack of structural changes will lower Russian GDP growth from 5.8 percent this year to around 4-5 percent annually if changes are not made.

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