Big rise in job losses expected in Sweden due to the coronavirus crisis

Big rise in job losses expected in Sweden due to the coronavirus crisis
Magdalena Andersson presents the forecast for the economy at a press conference. Photo: Janerik Henriksson/TT
The Swedish government expects the unemployment rate to reach nine percent this year -- the highest rate in more than 20 years -- due to the coronavirus crisis.

Finance Minister Magdalena Andersson stated on Tuesday that the number of redundancies is currently at a record high and that employment figures are expected to decrease further throughout the rest of this year.

The industries that have been worst affected are hotels, restaurants and retail, she said.

“More people will become unemployed and that is also something we assess in these forecasts,” the minister told journalists at a press conference.

The Swedish unemployment rate is currently around seven percent, and the expected increase to 9 percent would mean that another 100,000 people will lose their jobs during the year. A total of half a million people in Sweden would, according to the forecast, be unemployed by the end of 2020.

The government estimates that the unemployment rate will remain at this nine percent level during the year 2021 and will only slightly decline, to 8.4 percent, in 2022.

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Also included in the financial forecasts was an estimation that the Swedish GDP will fall this year by 4 percent.

“That’s about as much as during the financial crisis,” Andersson said of the forecasted GDP fall. “We have a very serious economic situation.”

These prognoses will form the basis of the ‘spring budget proposal’ to be presented by the government in a couple of weeks.

The ongoing crisis has created a sudden halt to both demand and supply, the minister said. Aside from a decline in demand, the economy is suffering from disruptions in the supply chain.

But despite a historically swift economic slowdown, she said she believes that the recovery will be quicker than after the financial crisis, and that the economy may begin to recover as early as autumn, and continue to grow in 2021. In that year, she said, the GDP is expected to rise by 3.5 percent.

“But these predictions are, of course, uncertain”, Andersson said. The use of resources is expected to decline sharply and Sweden will end up in a similar recession as during the financial crisis.

“The estimation is that the economic recovery will occur at approximately the same rate as an average economic recovery”, Andersson told TT news.

The government deficit is expected to hover around 3.8 per cent of the GDP this year, with a somewhat smaller deficit forecast for next year. That would mean the government debt would rise from around 35 percent of the GDP last year to nearly 40 percent this year.

“The measures we have presented thus far add up to 84 billion kronor,” said Andersson, referring to the measures introduced to assist the companies and individuals that have been negatively affected by the coronavirus crisis. And these costs might rise if the number of people who become unemployed or temporarily laid-off ends up higher than the government has estimated.

But she said that the policies carried out during the crisis are in line with the budgetary framework, and that Swedish public finances are fundamentally strong.

“The expenditure ceiling for this year will most likely have to be adapted”, she said.

This is an unusual measure, but has happened previously with government changes following elections.

“There are policies in place that allow the government to change the expenditure ceiling in case of completely new, external conditions,” she said.

 


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