Clear recovery hampered by weakness abroad

Report this content

The Swedish economy is on the road to recovery, and indicators suggest a return to optimism. Business and consumer confidence has picked up, unemployment is falling, and employment is continuing to grow. The economy is being held back, however, by problems abroad, which are only very slowly being resolved. Activity will therefore remain weak in the coming years, albeit less so than previously. Such are the results of the latest forecast from the National Institute of Economic Research (NIER), published today.

GDP growth in Sweden was weak in the third quarter of 2013, but new information suggests that growth will accelerate in the fourth quarter. Both consumers and businesses are upbeat about the future in the Economic Tendency Survey, with aggregated confidence well above the historical average.

Economic recovery will commence in the fourth quarter of 2013. Household consumption will grow more quickly in 2014 due to further low interest rates and a rapid rise in disposable income. Tax cuts and low inflation will help boost consumer purchasing power. However, the main driver behind the acceleration in GDP growth will be an upturn in investment and exports as external demand picks up. Investment will also be favoured by an increase in home-building.

There is now a clear downward trend in unemployment. The number of employed rose by 45,000 in the first nine months of 2013, which is faster than the increase in the working-age population. As demand grows next year, firms will initially make more efficient use of existing personnel but will then begin increasingly to recruit new staff, and so employment will continue to climb.

The Riksbank wisely cuts repo rate

The Riksbank's decision to cut the repo rate to 0.75 was wise given the low levels of activity and inflation. The decision will support economic recovery.

For further information, please contact:

Jesper Hansson, Director of Forecasting, +46 8 453 5972
Sarah Hegardt Grant, Head of Communications, +46 8 453 5911

Tags: