SHARE
COPY LINK

MONEY

2021 forecast: Vaccination progress will determine Sweden’s economic outlook

The Swedish economy has withstood the second wave of the pandemic better than the first, said the country's Central Bank as it released its new forecast for the interest rate.

2021 forecast: Vaccination progress will determine Sweden's economic outlook
Sweden's interest rate is expected to remain at zero until 2024. Photo: Izabelle Nordfjell/TT

The Riksbank warned that the pandemic was still having an impact on the economy and that much uncertainty about the future remained, adding that service industries were under “severe pressure” due to low consumption.

“Overall, however, the economy has been more resilient to the second wave of the pandemic than to the first. Vaccinations are now under way. As soon as the spread of infection decreases and restrictions are lifted, households are expected to return to more normal patterns of consumption, which will create favourable conditions for a rise in demand,” it said in its latest monetary report, released on Wednesday morning.

But it also said that the extent of the crisis meant that it would likely take until 2023 before the Swedish inflation rate permanently reaches the bank's target of two percent.

“Economic developments in 2021 will be largely determined by how quickly and effectively vaccinations reduce the pandemic,” it added.

The Riksbank said it would continue to purchase assets within the 700 billion kronor framework as previously decided, and hold the country's key interest rate, the repo, at zero percent. It predicted that the repo rate would remain at zero until 2024.

EDITOR'S PICK:

The bank took the landmark decision to slash the rate below zero in February 2015, hoping that the strategy would boost inflation to raise the price of everyday goods and services which had been stagnant, and therefore improve the Nordic nation's economic prospects. Almost five years later, it was raised from -0.25 to zero in December 2019.

Sweden's GDP is expected to grow 3.0 percent this year, which is higher than the bank's previous forecast of 2.6 percent, released in November, and 3.9 percent next year (lower compared to the previous forecast of 5.0 percent). Unemployment is expected to land at 8.5 percent this year, down from the previous forecast of 9.4 percent.

More than 300,000 people in Sweden have received the first dose of the coronavirus vaccine, but Swedish officials warned on Wednesday that distribution issues may cause vaccinations to be delayed.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

SHOW COMMENTS