Forecast for the Swedish economy

The Swedish economy is in an upturn. Gradually stronger international growth in increasing the demand for Swedish exports, which in turn is expected to contribute to increased investments, lower unemployment and rising resource utilisation. However, the forecast is uncertain and there is a great risk of weaker growth.

Recovery abroad
A continued recovery abroad creates the conditions for improved economic development in the Swedish economy. The recovery in the euro area appears to be slow, although prospects for economic development have become brighter in 2015. The European Central Bank’s expansionary monetary policy has stimulated exports and confidence in the economic outlook has increased among businesses and households. Good growth continues in the United States, where there is a positive trend in the labour market and unemployment has continued to fall this year. In China, a transition is under way from growth driven by investments to growth to a greater extent driven by domestic consumption. This change will probably lead to a more balanced, albeit lower, growth rate compared with 2000–2014. However, the change also presents major challenges, and the recent considerable turbulence on Chinese financial markets could indicate that the transition is proceeding less well than expected.

Relatively high GDP growth in the future

Sweden’s GDP is expected to grow at a relatively rapid rate in 2015 and 2016. This is due to several factors, including the expectation that the demand for Swedish exports will accelerate when international growth improves. In the years ahead, consumption and investment growth will also continue to contribute to growth. This applies to household as well as public sector consumption and investments in housing and the service sector. As a result of the recovery in the economy, resource utilisation will increase in 2015 and 2016.

The labour market is recovering

The Swedish economy has been in a protracted recession and unemployment has been at a high level for a long time, at around 8 per cent. As the labour force has grown rapidly, employment growth has not been sufficiently high to push down the unemployment rate. As economic activity will improve this year and next year, labour demand is expected to increase, thus also increasing employment. Employment is expected to increase mainly in the local government sector, but is also expected to grow at a good rate in business services and the construction sector. Overall, approximately 250 000 more people are expected to be employed in 2018 compared with 2014. It is estimated that in 2018, the unemployment rate will be close to 6 per cent.

Reduced deficit in public finances

Net lending reported by the general government sector in 2014 came to SEK -75 billion, or -1.9 per cent of GDP*. The deficit is expected to decrease from 2015 onwards. Net lending is estimated to be -0.9 per cent of GDP in 2015 and is expected to be turned into surplus in 2019. The central and local government sectors are estimated to show deficits in 2015, while the old-age pension system is expected to be in balance. General government net lending is expected to increase primarily due to increased net lending in the central government sector. Net lending in the old-age pension system is expected to decrease gradually throughout the forecast period, as a result of the expectation that pension payments will be indexed at a rate higher than the growth of contribution revenues, as well as an increase in the number of pensioners.­ The local government sector is expected to show weakly negative net lending, while the sector’s financial results will be positive during the forecast period. Gross debt as a percentage of GDP is expected to decline.

*After the figures used in the Budget Bill were set, Statistics Sweden revised general government net lending for the period 2011–2014. The deficit in 2014 was revised to SEK 67 billion, which represents 1.7 per cent of GDP.