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Slower growth ahead for Swedish economy: report

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13:34 CEST+02:00
Sweden's economic growth is expected to slow further in 2011 following record strong growth in 2010, according to a new forecast from the Sweden's National Institute of Economic Research (NIER).

The group expects Sweden's GDP to grow by 4.4 percent in 2011 and 2.9 percent in 2012.

At the same time, the NIER projects unemployment to decrease more slowly than previously expected, dropping to 7.5 percent this year, 7.2 percent in 2012, only falling down to more normal levels around 6 percent in 2015.

"We expect unemployment will fall at a relatively slow pace," NIER head Mats Dillén told the TT news agency.

In March, the institute forecast the Swedish economy would grow by 4.2 percent in 2011 and 3.1 percent in 2012.

"Now we're coming into a more normal recovery phase which is dampened a bit in the short term by a number of temporary factors," said Dillén.

Despite the lower growth, Sweden's economy remains "more favourable" for growth than most other OECD countries, according to the institute.

It expects business investment to rise rapidly in the coming years, and for Sweden to achieve an average annual growth rate of 3 percent between 2013 and 2015.

Sweden won't be back in a normal economic situation until 2014, according to the NIER. As a result, the institute argues for a continuation of expansionary economic policy in the coming years.

It expects the government to carry out a total of 30 billion kronor ($4.7 billion) in unfunded spending in 2012 and an additional 55 billion for the following three years.

"Our assessment is that we're still in an economic slump where unemployment is higher than normal. Therefore there's a need for stimulus, first from monetary policy but there is also some room for fiscal police stimulus," said Dillén.

According to the NIER, the Riksbank's benchmark interest rate, the repo rate, will reach 2.5 percent at the end of 2011 before notching up to 3.0 percent at the end of the following year.

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