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Why Sweden's economy is 'brightening' in 2015

The Local · 5 May 2015, 16:21

Published: 05 May 2015 16:21 GMT+02:00

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1. Shopping Swedes
There was a 2.1 percent boost for Sweden's GDP in 2014, one of the key indicators used to gauge the health of a country's economy. In simple terms it's a figure that represents the size of a nation's economy based on the total value of goods and services. One of the key reasons for this was Swedes opening their wallets. While many cautious Swedes are saving, consumption picked up last year, which basically means that more people were buying stuff in Sweden. "Supported by low interest rates, strong employment growth, steadily growing disposable incomes, record high savings rate of households and rising housing prices, private consumption is forecast to remain robust," European Commission economists have forecast.
2. Spending foreigners
Exports also increased in 2014, suggesting that more people living outside Sweden want to purchase Swedish products too. Almost 70 percent of Sweden’s exports go to Europe and the EU's overall improving economic performance is set to benefit Swedish exporters over the next few years. Exports are forecast to increase by 4.1 percent in 2015 and 5.3 percent in 2016. On the back of strong household consumption growth, imports are projected to grow even faster.
3. Investment
As the EU's report puts it, there was a "surprise rebound in investment" in Sweden last year, with more money flowing into the country including from international firms and start-ups. After dipping by 0.4 percent in 2013, investment expanded at a rate of 6.5 percent in 2014, the highest rate since the financial crisis. Investment growth is projected to rise at a slower pace of 4.1 percent in 2015 and 4.5 percent in 2016, off the back of this initial jump.
4. Lower unemployment
Unemployment has stuck stubbornly at around 8.0 percent in recent years, which the EU attributes partly to "rapidly rising numbers of immigrants and asylum seekers settling in Sweden". But Sweden's jobless rate is expected to dip to 7.6 percent by 2015, which in turn should benefit the economy by boosting production, limiting social welfare payments and giving more people extra cash to spend in Sweden.
5. Tactics
Story continues below…
Sweden's central bank has this year cut interest rates to record negative levels. The idea behind this is to stop organizations or people from making risky investments or transactions that could impact on the wider economy. Sweden has also opted to expand its bond-buying programme, which in basic language involves borrowing money to inject back into the economy. Prices of everyday goods and services in Sweden have been stagnant for two years in Sweden and the government hopes that its low interest rate and bond strategy will help boost inflation. It is argued that this in turn will improve the country's economic prospects. Sweden's central bank has set a 2.0 percent inflation target, while the EU predicts it will reach 1.6 percent by 2016.
6. Deficit reduction
Generally improving finances are also listed as a reason for Sweden's "brightening outlook", according to the EU, as the Nordic nation reduces its deficit (the term for when what the government spends amounts to more than what it generates). Sweden's national deficit is set to gradually improve from 1.9 percent of GDP in 2014 to 1.0 percent in 2016. But the EU warns that the country could veer off track due to the risk of higher costs linked to rising migration and related integration strategies.

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