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ECONOMY

Borg ‘more optimistic’ about Swedish economy

The Swedish economy is set to return to growth next year, but unemployment will remain high, according to a new forecast from finance minister Anders Borg.

Borg 'more optimistic' about Swedish economy

“The world has landed on its feet following the crisis,” Borg said in a statement when he presented the government’s latest economic forecast on Monday.

“There is reason to be more optimistic about developments in the Swedish economy,” he added.

According to the new forecast, Sweden’s GDP is expected to shrink by only 4.9 percent in 2009, compared to earlier forecasts predicting a drop of 5.2 percent.

Unemployment figures were also slightly improved in the new forecast, which projected a jobless rate of 8.5 percent, rather than the previously expected rate of 8.9 percent.

In 2010, the Swedish economy is expected to expand by 2.0 percent, a substantial boost to the previously projected growth rate of 0.6 percent.

For 2011 and 2012, Borg predicted growth of 3.4 and 3.3 percent respectively.

Unemployment was however expected to remain high in the coming years, in what is seen as a dark cloud hanging over the centre-right government.

Swedish Prime Minister Fredrik Reinfeldt has made getting Swedes into the workforce his number one priority since coming to power in 2006 but due to the crisis the jobless rate has risen significantly, with less than a year to go until next September’s general election.

Borg predicted unemployment would hit 8.5 percent of the workforce this year and 10.7 percent next year, before falling back to 10.5 percent in 2011 and 9.8 percent in 2012.

“The situation on the labour market will remain difficult,” he warned.

He said economic stimulus measures implemented during the crisis ought to stay in place for the next few years.

“Economic policy must remain expansive in the future. It will be a challenge to create new jobs,” he stressed.

He added that Sweden has coped well with the economic downturn, but that work remains to be done.

“We’ve avoided a depression and we haven’t had a banking crisis, but fiscal policy must remain strongly expansive so that we can stop unemployment from taking hold,” said Borg.

“We’re not going to experience what we experienced in the 1990s with several years of redundancy notices. We’re already back to 1994 levels,” he added, referring to Sweden’s unemployment rate.

In light of the improved forecast, Borg concludes that Sweden’s recovery will be somewhat stronger and that stimulus measures ought to continue during 2010 and 2011.

In addition, public finances will gradually be returned to balance, and eventually to surplus, according to Borg.

However, instability in the Baltic countries and a second wave in the financial crisis continue to threaten Sweden’s nascent recovery.

But unlike many other countries, Sweden’s public finances are in good shape, as are private savings, providing the country with an added buffer against another possible downturn.

Borg also emphasized the positive spiral of increasing confidence in the economy.

Despite the government’s increased optimism about the Swedish economy, however, a forecast also released on Monday by Almega, an organization representing employers in the service sector, paints a somewhat less encouraging picture

According to Almega, the Swedish economy will contract by 4.5 percent in 2009, before growing by 0.7 percent in 2010 and 2.5 percent in 2011.

The organization’s economists project that 123,000 people will drop off the country’s payrolls this year, including 77,000 manufacturing workers and 15,000 from the private service sector.

While Almega also believes Sweden is heading out of the economic crisis, the group foresees a slow and prolonged recovery and urged the government to implement additional measures to speed up the process, including making it easier for companies to make investments and find workers that match companies’ specific needs.

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ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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