What does the coronavirus mean for the Swedish economy?

The economic impact of the coronavirus pandemic has affected many areas of business with companies having to lay off workers in the worst-hit industries. This has prompted several measures from the Swedish government and Central Bank in order to weather the crisis.

What does the coronavirus mean for the Swedish economy?
The Swedish government proposes an emergency package of 300 billion in the wake of the economic impact of the corona pandemic on Monday, March 16th. From the left: Minister of Financial Markets, Per B
The coronavirus pandemic has hit markets on a global scale, with stock markets taking beatings on a scale not seen since the global financial crisis in 2008. This has left governments scrambling to come up with financial aid packages and political solutions.
Sweden benefits from having had several years of a booming economy, but the coronavirus is nevertheless likely to hit the country hard, with some areas of business already having to lay off thousands of workers.
“The coronavirus will have extensive negative effects on jobs and the economy, with some of those effects already showing,” Swedish Finance Minister Magdalena Andersson said at a press conference on Monday.
“Many businesses, companies and employees are worried and frustrated. And we need to be frank. Sweden has a heavy and strenuous time ahead. The entire society will be affected economically, including businesses, organisations, individuals and the public sector. But because this affects our entire country, we will also get through this together,” she said.
“We will use our strong public finances to try and mitigate the effects on jobs and companies. We have been working hard to get forceful measures in place in order to reduce the economic impact of the virus.”
Several economic measures have been proposed, or put in place, during the past week.
1. Government emergency package
On Thursday the Swedish government will propose a budget emergency package to the Swedish parliament of up to 300 billion kronor ($31 billion).
The main proposal is a new system for shortening work hours, while the employee will still retain 90 percent of their original pay. The state will foot a large portion of the costs, meaning that employers can cut their payroll expense in half. This new system will come into force in April but will be retroactively applied from March 16th. Both the employer and the employee need to be in agreement in order for the subsidy to be available.
The package also means the state will take on all the costs related to employee sick leave in April and May. Usually, sick leave costs are divided between the state and the employer.
And employers will be able to defer social security contributions, preliminary tax on salaries and value-added tax reported monthly or quarterly for 3-12 months. This will be retroactively available from January 1st, which means that they are able to get already-paid taxes back from the Swedish tax agency from the beginning of the year.
This is to help businesses maintain liquidity, so that they can keep paying out salaries.

Financial Markets Minister Per Bolund, left, and Finance Minister Magdalena Andersson, with economic policy spokespersons from the Liberal and Centre parties at a press conference on March 11th. Photo: Anders Wiklund/TT

2. Other economic measures
The karensdag or 'waiting day' for paid sick leave is removed between March 11th and May 31st, meaning that workers get sick leave pay from day one instead of missing the first day's pay.
The employee will need to apply for karensdag remuneration for the first day at the Swedish Social Insurance Agency (Försäkringskassan). This also applies to those who are self-employed. 
The governments budget also includes increased funding for smittbärarpenning, disease carrier's allowance, which is paid out by the Social Insurance Agency, since the number of people in need of that subsidy is expected to increase.
Municipalities and regions will be compensated for extraordinary costs related to the pandemic. These might include extra expenditures such as materials, staff costs, lab analysis and disease tracking (in Sweden it's the regions who have responsibility for healthcare)
And affected government agencies will get extra funding to cover expenditures connected to the pandemic:
  • 41 million – The Public Health Agency of Sweden (Folkhälsomyndigheten) 
  • 20 million – The National Board of Health and Welfare (Socialstyrelsen)
  • 5 million – The Swedish Medical Products Agency (Läkemedelsverket) 
Sweden's National Board of Health and Welfare will also get a triple increase in possible lending expenditure, from 100 to 300 million kronor, in order to buy protective equipment and coronavirus test kits.
3. Central bank measures
Sweden's Central Bank, the Riksbank, decided on March 13th to make loans of up to a total of 500 billion, available to businesses through the banks. Loans are given at the current base rate, reporäntan, at 0 percent.
“The turbulence on the financial markets risks otherwise healthy businesses' finances. In this case it is important that the banks continuously are able to lend to businesses so that credit supply isn't threatened. The measures taken in this situation should be seen as a form of insurance so that Swedish businesses – especially small and medium sized – can feel safe in that credit supply will continue flowing,” said Riksbank head Stefan Ingves in a statement.

Stefan Ingves, governor of the Swedish Central Bank. Photo: Claudio Bresciani/TT

Sweden's banks have promised to take responsibility for keeping the credit supply flowing according to Financial Markets Minister Per Bolund.
“I got a very clear message that they [the banks] are ready to shoulder their civic responsibility and also use capital resources made available to them in order to get Sweden through this difficult situation,” Bolund said to Swedish news agency TT.
The Swedish Financial Supervisory Authority (Finansinspektionen) has also proposed lowering the buffer rate requirements of banks from 2.5 to 0 percent, a reduction of around 45 billion, in order to increase lending capacity. The lowered rate will be applied on March 16th for at least 12 months.
The supervisory authority declared on March 16th that they will allow banks to fall below the liquidity coverage ratio (LCR) set by the EU's banking regulatory system. In normal circumstances banks are required to report falling below, or expecting to fall below, the LCR.

4. Swedish jobs and mortgages

The airline and hotels businesses are haemorrhaging jobs with the tourism sector having laid off more than 15,000 employees as of March 16th.

The airline company Norwegian has cancelled over 4,000 flights and has said it needs to lay off more than 50 percent of their employees. The company has also stated that it needs financial support within a few weeks in order to survive. Similarly, SAS has announced plans to make up to 10,000 staff members temporarily redundant.

The aviation airline Norwegian is close to bankruptcy. Photo: Johan Nilsson/TT

Several other airlines have also notified that they need to cut down on staff expenditures.

“I think we all realise that this is the biggest challenge the aviation business has ever faced, bigger than during the financial crisis,” Infrastructure Minister Tomas Eneroth told TT after meeting with representatives.

Many small business owners are also worried about having to lay off employees. As well as government aid outlined above, several private initiatives have been launched across Sweden to help small businesses. You can read more about them in this article.

Some banks, such as Nordea and Danske Bank, have promised their customers, businesses as well as individuals, deferments on mortgage and loan payments if they end up in financial difficulties due to the coronavirus crisis.

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EXPLAINED: Can you negotiate a pay rise in Sweden to offset inflation?

With Sweden's central bank expecting inflation of nearly 8% this year, everyone working in the country is in line for a real-terms pay cut. We asked Gunilla Krieg, central ombudsman at the Unionen union, what scope there is to negotiate a salary hike to compensate.

EXPLAINED: Can you negotiate a pay rise in Sweden to offset inflation?

With Sweden’s central bank expecting inflation of nearly 8% this year, everyone working in the country is in line for a real-terms pay cut. We asked Gunilla Krieg, central ombudsman at the Unionen union, what scope there is to negotiate a salary hike to compensate.

How soon can I get a pay rise to compensate for high inflation? 

Probably not for a while. 

About 90 percent of workers in Sweden are covered by the collective bargaining agreements made between employers and the country’s trade unions. The last round of salary deals was negotiated at the union-employer level back in 2020, and most of them will remain valid until March or April next year.

This means that most employees in Sweden will not see their salaries adjusted to take inflation into account for at least nine months. 

“Under this special model that we have, we already have a level for the wage increases for this year, so you can’t get compensation for the inflation right now,” Krieg explained. 

You might be able negotiate a pay rise in addition to what the unions have agreed in your personal salary review, she added. 

“Of course, you have that freedom. Whether you work in a small company, or a big company, a company that has a collective agreement, or one that doesn’t, you always have the freedom to ask for a salary rise,” Krieg said. 

The only issue is that most unionised companies only offer personal salary reviews once a year, and for the majority of employees, the window of opportunity passed in the spring. 

“You have to find out when you have a salary review as part of the collective agreement you have at your own workplace,” Krieg recommended. “For most collective agreements, that is in the spring, although some collective agreements have it in the autumn.” 

What if I’m not part of a union? 

If you are among the 10% of workers not covered by a collective bargaining agreement, you can ask for a pay rise whenever you like, but unlike union members, you have no right to a pay rise. The decision is wholly up to your employer. 

Gunilla Krief is the central ombudsman for the Unionen union. Photo: Patrik Nygren/Unionen

So will the unions eventually negotiate above-inflation pay increases? 

Probably not. 

Unions in Sweden have historically been quite responsible, and understood the risk of creating a wage-price spiral by demanding wage increases that match or exceed inflation.

“Twenty-five years ago, we had a really high wage increases in Sweden, and we had very, very big inflation, so people got more money in their wallets, but they couldn’t buy anything, because inflation went up much higher than wages,” Krieg explained, putting the union perspective.

“We always take responsibility for the entire labour market, and that’s good in the long term,” she added. “There’s been much more money in the wallet for employees in Sweden over the past 25 years. That’s why we think we should we should not panic because of inflation. It may be that for one year it will mean less money in the wallet, but in the long run we benefit.” 

Can I argue for an inflation-busting pay rise in my salary review? 

You can certainly argue for a pay rise of 8 percent, or even more, but you don’t cite inflation as a reason for it. 

“Everything is individual, so you can, of course, negotiate up your salary, and there is no limit to how much you can ask for,” Krieg explained.

“If you have a job or an education for which there’s a shortage on the Swedish market, then you can get a much higher wage increase. Up in the north of Sweden, where we have [the battery manufacturer] Northvolt, and we have mines and the steel industry, they are looking for a lot of competence right now, and there you can have a much higher rise in wages.” 

But, particularly if you’re covered by collective bargaining, you can’t really cite inflation as justification, as that is one of the factors that unions and employers are supposed to factor in during their negotiations. 

What’s the best way of getting a big pay rise? 

The best way to get a pay hike of as much as 5,000 kronor or 10,000 kronor a month, Krieg suggests, is to apply for other jobs, even if you don’t end up taking them. 

“You can get offers from other companies, and then you can tell your employer that ‘I really liked it here, I enjoy this work, and I want to stay here, but now they are offering me 10,000 kronor more at another company, and if you can raise my salary like that,  of course I will stay here’,” she said.

In a normal salary interview, she adds, it’s important to be able to demonstrate your results. Look again at your job description, and what your goals are for the year, and identify concrete achievements that meet or exceed these goals. If you have any additional duties, you can cite them to argue for a higher salary. If you’ve done any courses, or learned any skills, you can cite these. 

At any time in the year, if your superiors praise any work you have done, keep those emails, or write it down, so that in your salary review, you can say, “you said that this report I did was ‘the best you’ve ever seen’,” or such like. 

Finally, you should find out in advance if there are any salary criteria being applied, so that you can argue that you exceed them, and so demand a higher raise than that agreed for the company as a whole with the union.