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IMF praises Sweden for handling of crisis

TT/The Local · 7 Jun 2010, 13:05

Published: 07 Jun 2010 13:05 GMT+02:00

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However, the IMF has cautioned that its outlook for Swedish growth is uncertain, saying that the Riksbank should enact a "gradual and cautious" tightening cycle with regards to raising the repo rate.

The uncertainty regarding Swedish growth has increased in step with the debt crisis in Europe that gained momentum in the spring, according to the IMF.

Peter Doyle, who led the annual review of Sweden's economy, sprinkled praise on the Riksbank and the government for their handling of the crisis.

He could not think of anything that could have been done better.

"I believe that the answer is no, despite there having been a huge economic shock," Doyle said in a statement. "The government has allowed the budget surplus to turn into a deficit in order to keep demand up and the Riksbank has kept interest rates down."

The IMF also welcomed the Financial Supervisory Authority's (Finansinspektionen) proposal to place a cap on mortgages at 85 percent of the market value of the dwelling to be purchased. According to the IMF, this ceiling can act as insurance against undesirable consequences from excessive lending to home buyers.

The IMF noted that Sweden's GDP fell by 5 percent last year while unemployment rose to over 9 percent and the financial strength of the export industry deteriorated.

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At the same time, Doyle thinks that the current turmoil in Europe is hard to judge. He feels that the Riksbank should take into account these concerns at the next interest rate meeting.

"It's hard for anyone to assess what the worries involve, but it is definitely something one should consider," he said. "However, it is possible that the situation will be clearer in July. We think the Riksbank's interest rate path is otherwise a reasonable path on the basis of developments in Sweden."

TT/The Local (news@thelocal.se)

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Your comments about this article

13:52 June 7, 2010 by the fonz
This should be very comforting for all those that voted against joining the Euro. More people will now see through all the smoke that the pro euro brigade create with their scare mongering about what will happen if it is rejected.

Sweden can continue going from strength to strength as long as this progress is allowed to continue. Lower taxes create greater tax receipts and control of your own currency allows you to react independently to economic situations.
14:45 June 7, 2010 by Puffin
Surely the basis of Sweden's success is the huge recession and banking crisis in the 1990s which meant that Sweden had already restructured prior to this recession
14:50 June 7, 2010 by calebian22

Exactly correct. Sweden learned the first time.
00:59 June 8, 2010 by alingsaskev
Sweden benefits from being a net exporter of essential materials. It has a huge resource to population ratio. It benefits from being in the EU but not constrained by the fiscal rules of the Euro and it is cushioned from the international crisis by having a hugely tax driven economy.

In effect money flows into the country through exports and then is circulated rapidly and continuously at almost 80% levels through fiscal stimulus.

It is the envy of the world and works flawlessly because the Swedish population don't mind working their guts out all day and then handing 80% of their pay cheque back over to the government for their troubles. It's a win win!
05:48 June 8, 2010 by Celc
@alingsaskev - Working their guts out? We were below France in the number of hours worked annually in 2004 (I think we are closer to the middle of the OECD countries now, but I can't be bothered googling the latest OECD report) . http://en.wikipedia.org/wiki/Working_time#Differences_among_countries_and_recent_trends 80% of our paycheck... Stop making up numbers because they feel nice.
08:32 June 8, 2010 by alingsaskev
@ Celc. Okay so 77.6% of percentages are made up on the spot.

If Astrid Lindgren could be taxed 102% of her earnings you get my point.

If you take into account, Income tax, House Tax, Council tax, Bin tax, Road Tax & Cumulative MOMS, you will probably find the amount the average swede is taxed to be in the region of about 70 to 80%

Woking their guts out... okay, so Compared to the UK, swedes get off pretty lightly, but at the end of the day, swedes work to pay taxes and little else. This is the Scandinavian model.
15:52 June 8, 2010 by Audrian
The IMF is the most untrusted international institutions in developing countries, mainly because it is meant to serve the interest of the US and Europe.Its concern is to open developing countries market for the west without doing the same on behalf of developing countries. It has one type policy prescription for all types of development ills.

It has been forcing these countries to carry deflationary policy, which contracted their economies and increased unemployment. It was powerfull because US and Europe demand that developing countries that are seeking foreign assistance should implement IMF recomendations and reck their economy before they are legible for loan or assistance.
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