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Jobseekers entering an office of the Swedish Public Employment Service back in 2016, when the economy was booming. Photo: Jessica Gow/TT
The August 2019 economic forecast from the European Commission's Directorate-General for Economic and Financial Affairs sees the rate of growth of Sweden's real GDP dropping to one percent next year.
This is slower than what is expected for all but four of the other 28 European Union members, and well below the brisk four percent rate the country enjoyed back in 2015.
“Sweden’s economy is clearly slowing down. Domestic demand and investment in particular are weak,” the report read, blaming the insipid domestic demand on a decline in investment in the housing market following years of strong growth.
The slowing economy had also pushed Swedish manufacturers to hold back on investments in equipment, exacerbating the decline.
The authors pointed out that planned government spending would do little to pick up the slack.
“In spite of sizeable spending needs for schools, health care and welfare services linked to demographic developments, general government consumption is set to moderate in 2019 and 2020,” the report read.
“Costs linked to migration should decrease, whereas new defence and health care expenses, priorities of the 2019 budget, are partially compensated by cutbacks on, among other items, labour market and environmental measures.”
While the report predicted that growth would start to pick up again in 2021, it warned that this recovery could be knocked off course by bad news internationally.
“As the Swedish business cycle is closely aligned to that of its main trading partners, a deterioration of the external environment would weigh on the export sector,” it read.
Real GDP in Germany and Belgium was also predicted to grow by just 1 percent in 2020, while Italy was expected to see a still more anaemic 0.04 percent growth rate. Every other EU country was predicted to grow faster, with Romania seeing the fastest growth at 3.6 percent.