Economic outlook – April 2016

Slow global recovery

Global GDP growth in 2015 was moderate. Growth in many emerging economies has slowed. In early 2016 increased uncertainty about future developments has contributed to uncertainty in the financial markets. Global growth is expected to pick up again in 2017.

Strong recovery in Sweden and falling unemployment

The Swedish economy is recovering rapidly from a long period of low resource utilisation. GDP growth was high in 2015 and is expected to remain high also in 2016. As resource utilisation rises, GDP growth is expected to slow somewhat in 2017.

Unemployment fell significantly in 2015 and is now at around 7 per cent. This is the lowest level of unemployment for seven years. As a result of the strong growth in demand, unemployment is expected to continue to fall to 6.3 per cent in 2017.

Inflation has been low for a long time. Higher resource utilisation provides greater scope for businesses to raise their prices, which will help push up inflation.

Stronger public finances in the long term

The Government has adjusted fiscal policy along more responsible lines, and the deficit has fallen sharply since the Government took office. The large number of asylum seekers reaching Sweden in 2015 and the investments being made to enable new arrivals to quickly establish themselves in society and the labour market involve temporary costs that weaken general government net lending in the short term. General government net lending is therefore expected to improve later in the forecast period than previously assumed. The deficit in the general government finances is expected to increase up to and including 2017.

Due to the favourable economic situation and the fiscal policy pursued, net lending will grow as of 2018. A surplus of 0.7 per cent of GDP is expected in 2020.

Consolidated gross debt fell in 2015 and amounted then to 43.4 per cent of GDP. This leaves a comfortable margin to the reference value of 60 per cent of GDP required by the Stability and Growth Pact. Gross debt is expected to continue to decline to 36.9 per cent of GDP in 2020.

The consolidated central government debt is estimated to have been SEK 1 352 billion in 2015, which corresponds to 32.5 per cent of GDP. The central government debt is also expected to fall as a percentage of GDP each year from 2015 to 2020.

But the economic outlook is uncertain

Uncertainty about the macroeconomic outlook is high. There is a real risk that growth will be weaker than forecast, if, for example, growth in the euro area slows. But, by the same token, the economic outlook could be stronger if, for example, businesses and households around the world become more optimistic about the future than assumed.

A further source of uncertainty is the number of people who will actually seek asylum. The forecast is based on the Swedish Migration Agency's average-case scenario of the number of asylum seekers, but this presumption may change as it is genuinely difficult to predict how many people will seek asylum in Sweden over the coming years.