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ECONOMY

Sweden ‘strong like Pippi Longstocking’: OECD

The head of the OECD compared the strength of the Swedish economy to that of the popular Astrid Lindgren's character during a conference in Stockholm on Thursday.

Sweden 'strong like Pippi Longstocking': OECD

“The Swedish economy is strong like Pippi Longstocking,” OECD secretary general José Ángel Gurría said.

The organisation forecast continued strong Swedish growth of 3.9 percent this year and 3.4 percent in 2012.

Despite the impressive numbers, Ángel Gurría warned that a number of elements were out of the country’s hands.

“Sweden is a success story, even though you are vulnerable to things you have no control over because you are a small open economy,” he noted.

Ángel Gurría went on to praise Sweden, declaring the country “an island of prosperity” in very shaky waters.

“And when I say it, your interest costs will decrease even more,” he joked.

The OECD’s estimates for strong growth in Sweden in the coming years are bolder than many Swedish economic analysts’ expectations. GDP grew by 5.2 percent last year and is expected to grow by 3.9 percent this year.

The organisation also expects the strong growth to continue in 2012 by an additional 3.4 percent.

Sweden has weathered the global financial crisis well, OECD economists stated in their analysis of economic developments in Sweden. The crisis has shown that the Swedish economic framework works well, the organisation said.

The OECD lauded Sweden for heeding the experiences of its own problems in the past, saying the country “learned the right lessons from the severe banking crisis in the early 1990s.”

Sweden also won praise for its “ambitious” action in reducing greenhouse gas emissions. However, the OECD noted that its goals could be achieved at a lower cost. The OECD also noted that it is time to roll back the emergency measures that were in place to mitigate the crisis.

This means that support for banks could be withdrawn, while at the same time, it is time for Sweden’s central bank, the Riksbank, to raise interest rates. However, the Riksbank was criticised for communicating that the economic situation in the country was “improving.”

In addition, the OECD believes that the division between the Riksbank, the Swedish National Debt Office (Riksgälden) and the Swedish Financial Supervisory Authority (Finansinspektionen) needs to be revised and become more transparent.

“There is a kind of fragmentation in terms of the responsibilities between the three institutions. The overhaul need not result in only one supervisory body, but coordination is important,” said Ángel Gurría.

The labour market has taken a turn for the better, but the OECD warns of the risk of long-term unemployment becoming entrenched at high levels. In its forecast, the OECD forecast the Swedish unemployment rate at 8.4 percent for 2010, 8.0 per cent this year and 7.5 percent in 2012.

“Due to the government’s reforms to get more people into work, we are now in a stronger position than many other countries. But we must continue to improve the functioning of the labour market by making it more worthwhile for low and middle-income earners to work,” Finance Minister Anders Borg said at the conference.

“At the same time, the government must also safeguard Sweden’s position with strong public finances. We will protect and strengthen the methods we use to deal with crises in the financial system and banks in crisis, without great burden on public finances,” he added.

“The problems that countries around the world are experiencing with their public finances underline the importance of this,” Borg continued.

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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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