Borg: Strong economic recovery continues

Sweden appears to be making a spectacular recovery from the deep recession its export-reliant economy experienced during the global financial crisis.

Borg: Strong economic recovery continues

“It’s pretty fair to say that the sun is shining over the Swedish economy currently,” Swedish Finance Minister Anders Borg told reporters after the latest figures were published.

Economic growth in the Scandinavian country accelerated in the second quarter by 4.6 percent on a 12-month comparison and by 1.9 percent compared to output in the previous quarter, according to revised numbers from the national statistics agency.

With less than two weeks to go ahead of general elections, these figures represent the country’s highest growth rate since 2000.

The latest GDP figures “probably mean that you actually have to compare Sweden to Asia to see figures of the same magnitude. Very few European countries are above three percent and even fewer are above four percent,” Borg said.

He added that on top of having the smallest deficit in the EU, the government expects to post a budget surplus by 2012.

Borg reiterated that the election’s most important issues are maintaining sound public finances and rebuilding a budget surplus, restoring full employment and investing more in education and vocational training.

“People on long-term sickness benefits and taking early retirement are still high,” he told reporters on Wednesday. “We need to stimulate employment and increase incentives for the unemployed to look for jobs through measures such as vocational training. The longer they are inactive, the harder it is for them to re-enter the job market.”

He added that although the Swedish education system has traditionally been at a high quality, its standing in rankings by the OECD and other agencies has slipped, especially in math and languages.

“We have a high-capital economy,” he told reporters. “We need good engineers and that requires strong math. Average in Europe is not good enough. Finland spends less on education, but their education system is better. More vocational training is needed like in Denmark and Austria, especially to address youth unemployment.

Although the turnaround is closely linked to a strengthening global economy that has improved the climate for manufacturing and exports, analysts say the Nordic recovery also rests on strong fundamentals such as healthy public finances and strong consumption.

The new numbers place Sweden’s economy at the very forefront of the European crowd, alongside Germany, Poland and Slovakia and far ahead of average EU growth in the second quarter of 1 percent compared to the previous three-month period and 1.9 percent year-on-year.

“Of course, we’ve had a larger decline last year in particular in the manufacture industry and [now] we’re bouncing back,” explained Olle Olmgren, an analyst at SEB.

“But a more underlying factor is that the domestic demand is very firm, with households that have strong balance sheets, unemployment falling, increase of consumption and the same is true for public finances,” he told AFP.

Contrary to many other EU countries that face towering debt and harsh austerity measures, the Swedish government has benefited from strong public finances to put in place economic stabilisation mechanisms and plans to continue to strengthen the country’s famous welfare state, Olmgren pointed out.

Borg reiterated that the Moderates would postpone tax cuts in 2011 and 2012 in response to the projected labour cycle, pointing out that although the situation appears robust for Sweden at the moment, current circumstances among banks in southern Europe may be problematic in the future.

Sweden began to raise interest rates in July, becoming the first EU country to do so after the crisis.

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Strong Nordic economies face threat in 2015

Sweden and Norway's economies may have outperformed the rest of Europe since the financial crisis, but a leading bank in the region has warned that they are under threat.

Strong Nordic economies face threat in 2015
Danske Bank, which is one of the largest financial enterprises in the Nordic region, argues that falling oil prices and deflation could affect Scandinavian economies which previously managed to weather the storm of the global banking crisis much better than many of their European neighbours.
"The Nordic countries have been looking strong in recent years, with economic and financial crisis in much of Europe… However, after years of robust growth, the shine seems to be wearing a bit off," said economists led by Steen Bocian in a report from the Scandinavian bank out Thursday.
The report also noted that Finland had been hit by the recession in Russia, linked to the ongoing unrest in Ukraine.
Norway and Sweden reported economic growth of 0.7 percent and 1.3 percent respectively in 2013. Across the EU, there was an average of no growth in the same period.
But growth has slowed in recent months, with Sweden and Norway reporting 0.5 percent percent between July and September 2014 and Sweden recording 0.3 percent.
"This does not mean that there are signs of economic crisis in the two otherwise very strong economies, but growth rates are heading towards the European average and downside risks have increased," said Bocian.
In Sweden rising household debt and a complex and overpriced housing market have caused concerns for economists, while falling oil prices are having an impact on Norway.
Both currencies have weakened against the US dollar in recent months.
Danske Bank has forecast that growth will remain a challenge for Sweden in 2015.
"To reduce the risks linked to the increasing household debt, Sweden has introduced stricter rules for amortisation, which will increase savings and thereby reduce the strength of domestic demand – the main engine in the Swedish economy in recent years," said Bocian.
Denmark bucks the trend in Scandinavia, with Danske Bank reporting that the “economy seems to be slowly moving in the right direction”. 
“GDP growth was positive in Denmark in 2014 – the first year of positive growth rates since 2011. Danish house prices are increasing and consumption seems to be picking up and in the forecast period should continue to be supported by the significant drop in oil prices,” the report reads.