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ECONOMY

Swedish economy set to simmer on

The Swedish economy has reached boiling point and is expected to continue simmering for the foreseeable future. The Stockholm Stock Exchange is also predicted to build on the advances made over the last few years.

According to insurance company Länsförsäkringar, there is little risk that the economy will boil over. While there is increasing inflationary pressure, this can be tempered by Riksbanken raising interest rates a further percentage point to 4 percent.

Households are expected to have more disposable income, paving the way for continued high consumption. And the labour market situation will gradually improve during 2007 and 2008, with 150,000 more people in work.

Länsförsäkringar estimates that, minor blips aside, share prices on the Stockholm Stock Exchange, and in stock exchanges around Europe, will rise by about ten percent this year.

The company further calculates that Sweden’s GDP will increase by 3.8 percent in 2007 and 3.1 percent in 2008.

ECONOMY

Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s. 

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