What’s in store for the Swedish economy in the second half of 2021?

What's in store for the Swedish economy in the second half of 2021?
People are going out and spending again, as pandemic restrictions lift. Photo: Sofia Sabel/imagebank.sweden.se
The economic forecast in Sweden looks remarkably positive as pandemic restrictions ease, but the threat of the Delta variant still looms.

It seems that the Swedish economy is recovering from the coronavirus pandemic faster than anyone thought a year ago. 

The latest report by the National Institute of Economic Research (Konjunkturinstitutet) is broadly optimistic about the state of the economy this year. 

Ylva Hedén Westerdahl, director of forecasting at the institute and one of the authors of the report, predicts that Sweden will have a normal economy by the end of this year, or the beginning of 2022. 

“If I look back one year, the Covid virus has spread much worse than what we thought, but the economy has fared better,” she told The Local.  

“It’s more like economy was put on hold.”

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According to Statistics Sweden’s indicator, GDP increased by 0.9 percent while employment rose by 1.2 percent in the second quarter of 2021. 

As pandemic restrictions are lifted, households are starting to spend money again and the economy seems to be bouncing back. 

“Lots of people have saved, people feel wealthier,” Hedén Westerdahl said. 

Recovery is happening much quicker than previously predicted. According to Statistics Sweden, GDP increased by as much as 2.5 percent in June 2021.

As well as this, confidence in Swedish industry is booming. 

The institute’s barometer indicator, which reflects the mood of the economy as a whole by surveying 2,500 businesses each month, has continued to rise. In July it was at the highest level since they began measuring in February 2007. 

“It seems that firms can keep production going even though we have a pandemic,” Hedén Westerdahl said. 

“We have all learned to work from home.”

She noted that this differs depending on the industry though. The service industry has been hit particularly hard, but things are looking better there too, with firms starting to hire again. 

Public finances are also strengthening with the recovery, with a budget surplus of 40 billion kronor in public coffers, or what the institute calls “unfunded measures” – money that can be spent on future reforms without having to raise taxes to fund them.

But there is still significant uncertainty, largely due to the Delta variant of the coronavirus. It’s possible that restrictions to curb the spread of infection tighten again in autumn if cases rise, and this would impact economic growth. 

Over the course of next year, the report predicts that employment growth will slow down further as GDP increases more slowly, but the number of employed people will still increase. Many businesses are looking for skilled workers again.  

“Things are looking good!” Hedén Westerdahl said. “But we need to keep the coronavirus in control.”

The new report came on the same day a report by Sweden’s Employment Agency found that unemployment fell in July, but the number of people in long-term unemployment increased. A total of 190,000 people in Sweden have now been without a job for over a year.


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