| · When the turbulence on world markets subsides, interest rates will fall even more. Bond markets do not yet fully reflect the temporary economic slowdown which will arise as a result of the Asian crisis next year. Strong public finances and a bright inflation outlook indicate that the spread between Sweden and Germany will narrow. If the world economy falls into a deep recession, interest rates will fall even more.
· The Asian crisis will lead to an economic slow down in Sweden as well, not least due to the fact that the contribution of net exports to GDP will fall sharply. Next year we expect GDP growth to fall to 2 percent. Thanks to low interest rates and increasing real incomes, domestic demand will gradually pick up momentum, taking over as the growth engine in the economy.
· Our relatively positive picture of the Swedish economy is in not dependent on the outcome of the election. There is consensus among the major parties about the importance of stable public finances, low inflation, tax cuts and a more flexible labour market. Furthermore, any free-spending politicians are now faced with a number of institutional obstacles.
· The inflation outlook is still very positive, perhaps even brighter than it was in the spring. In our main scenario, we forecast no further depreciation of the krona. We therefore adhere to our previous forecast, i.e. that the Riksbank`s inflation report will pave the way for a further repo rate cut.
· The Asian crisis will culminate within the next six months. The first sign of a global recovery will appear next summer, and in the year 2000 growth in the industrial world should be relatively good.
Stockholm, 2 September 1998
Jan Häggström, Chief Economist For further information: tel +46 8 701 1097, +46 8 70/761 4366
The tables included in the press release are available to download on:
http://www.huginonline.se/SHBA/PM/eng_980902.pdf |
