Sweden's GDP at market price is expected to shrink by 3.4 percent in 2020, according to the National Institute of Economic Research's latest forecast about the current and future state of the Swedish economy. That's an improvement on its August forecast, when it estimated GDP would shrink 4.8 percent.
“We are now seeing clear signs that there will be a strong rebound during the third quarter of this year,” the institute's forecast chief Ylva Hedén Westerdahl told a press conference on Wednesday.
But the pandemic has hit Sweden's labour market hard, and the country's unemployment rate is expect to keep rising, before peaking at almost 10 percent in the fourth quarter of 2020.
“When the labour market then recovers it will primarily be those who do not belong to vulnerable groups who get jobs. It will take time before those who are older, born outside of Europe, and with a low level of education get a job. It is going to be a challenge,” said Hedén Westerdahl.
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Unemployment is expected to start the long road to recovery next year. According to the National Institute of Economic Research, the government's welfare measures to help cushion the economy during the pandemic have held both businesses and households “under the arms”. Increased international demand and fewer restrictions on international transport of goods are also helping export revenue increase again in export-dependent Sweden.
But the slump is nevertheless expected to impact the Swedish economy for years.
GDP is expected to grow 3.6 percent next year and 3.3 in 2022, but will then slow down to a growth rate of 1.9 and 1.7 percent in the following two years, according to the institute's forecast.
“It will take time before we are back to normal levels. The slump won't be over until 2023,” said Hedén Westerdahl, warning that there are several other threats looming on the horizon.
Some of those are the increased spread of coronavirus infection in many countries, signs that it may take longer than many had hoped for to develop a vaccine, as well as Brexit and the US election fuelling risks of geopolitical disturbance and trade wars, according to the institute.
“The recovery that we're seeing is fragile,” said Hedén Westerdahl.