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Dark future forecast for Swedish economy

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Dark future forecast for Swedish economy
Stockholm City Hall under the cover of clouds. Photo: Image Bank Sweden
11:01 CET+01:00
Sweden's Finance Minister Magdalena Andersson has formally lowered her growth forecast for the country's economy, suggesting it will expand by 2.4 percent this year and 2.7 percent in 2016.
The figures contrast with her autumn prediction of a 3.0 growth in 2015, rising to 3.2 percent the following year.
 
Speaking after the announcement, she told Swedish media that she was looking to implement "new reforms" designed to improve the situation, but added that it would be "inappropriate" for Sweden to follow other European countries and introduce tough austerity measures.
 
The government has already announced that it plans to raise taxes, although this will most likely not be possible until November 2015, due to the complex December Agreement that the Social Democrat-Green coalition government struck with the centre-right Alliance parties after it failed to get its budget passed at the end of last year.
 
When Andersson has discussed the country's finances in recent months, she has used a metaphor which sounds strange in both Swedish and English: "the barns are empty". On Tuesday she said the barns were now "bleeding" too.
 
"In the short term, we see that Swedish growth has still not really taken off. The slow recovery abroad is holding back growth in the Swedish economy," she added.
 
 
Andersson also suggested that lower household spending than previously predicted coupled with rising costs linked to sick leave and migration in Sweden were putting a strain on the country's finances.
 
While recent unemployment figures suggested that more Swedes are now in full time work than a year ago, Andersson also said that she expected the country's jobless rate to be higher than previously predicted.
 
She suggested that a rate of 7.7 percent was likely in 2015, up 0.4 percentage points on her autumn prediction.
 
But she said that her Social Democrat party's goal that Sweden should have the lowest unemployment rate in the EU remained unchanged.
 
"We will not abandon the goal, but it is more challenging than before," she said.
 
Earlier this month, Danske Bank, which is one of the largest financial enterprises in the Nordic region, argued that falling oil prices and deflation could affect Scandinavian economies which had previously managed to weather the storm of the global banking crisis, including Sweden.
 
"This does not mean that there are signs of economic crisis...but growth rates are heading towards the European average and downside risks have increased," said Steen Bocian, the lead economist who worked on the report.
 
"It's not looking better than in the autumn, quite the opposite. The money has run out," Magdelena Andersson said at a later press conference on Tuesday.
 
Annika Winsth, chief economist another of the region's key banks, Nordea added to the AFP news agency: "The government now has a forecast that is much in line with ours".
 
 
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