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Article from Ministry of Finance

Latest forecast for Sweden's economy

Published

April 2015
A gradual recovery is expected in the Swedish economy in the coming years. The economic situation in the world around us appears to be improving, even if all the indications are that the recovery will be slow, particularly in the euro area. Stronger international developments will increase the demand for Swedish export goods and services, which in turn is expected to contribute to increased business investments, lower unemployment and rising resource utilisation.

Gradual recovery in the Swedish economy

The growth rate in the Swedish economy rose slightly in 2014 compared with 2013 and a recovery has begun. Growth was mainly driven by investments and household consumption. The slow international recovery, however, led to weak Swedish export growth.

In 2015 and 2016, though slow growth is expected in many countries in the euro area, the rate of growth is expected to pick up in many countries that are important trade partners for Sweden. As a result, Swedish exports are expected to grow more strongly as well.

The growth rate in household consumption is also expected to pick up, partly because of low interest rates and the gradual improvement of the labour market situation. The combined effect will be a gradual recovery in the Swedish economy, with growth of 2.4 per cent this year and 2.5 per cent next year (adjusted for calendar effects).

Unemployment will gradually decline

Unemployment is expected to decline as the economic recovery increases the demand for labour. However, the labour market will recover relatively slowly. Overall, approximately 380 000 people are expected to be unemployed in 2016 , which corresponds to 7.1 per cent of the labour force. A large proportion of them will probably be people who have difficulty obtaining a firm foothold in the labour market.

The risk of a weaker development is considered relatively high, particularly if the international economy performs less well than expected. A weaker development would particularly hurt the groups that already have a weak attachment to the labour market.

Public finances show deficits

The public finances, which have gradually deteriorated since 2010, weakened further in 2014 compared with 2013 and the public sector showed a deficit of SEK 74 billion, or 1.9 per cent of GDP. The deterioration is due partly to the relatively weak economic recovery and partly to unfunded measures, particularly unfunded tax cuts, implemented by the previous Government. The deficit in public sector finances is expected to decline from 2015 onwards as a result of the economic recovery and the responsible conduct of economic policy. Net lending is estimated to be -1.4 per cent of GDP in 2015 and is expected to be in balance in 2018.

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. The strengthening of net lending that is expected to occur from 2015 and forward will be concentrated to the central government sector. Net lending in the old-age pension system is expected to gradually weaken throughout the forecast period. The local government sector is expected to show weakly negative, but stable, net lending, while the sector's financial results will be positive and in line with good financial management throughout the forecast period (2015-2019).

As a consequence of the deficits in the public sector, gross debt in 2015 is expected to increase slightly as a percentage of GDP. Gross debt as a percentage of GDP is expected subsequently to decline slightly during the forecast period.

About the forecast

What are the risks of developments deviating from the main forecast?

The forecast is uncertain and there is a substantial risk of a weaker outlook. Poorer economic developments in the euro area are the single largest risk factor. Having said that, the outlook may turn stronger if the recovery in the euro area progresses more rapidly than assumed in the forecast.

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