Continued sluggish recovery

Recovery in the Swedish economy will take time due to weak growth in demand for Swedish exports, but there are some rays of light. The employment rate is continuing to climb, and homebuilding is beginning to pick up. Such are the results of the latest forecast from the National Institute of Economic Research (NIER), published today.

Domestic demand is contributing more to GDP growth than in previous economic recoveries. Exports are playing less of a role due to the weak economic climate abroad. GDP will grow by 2.2 per cent this year and 3 per cent next year.

Demand this year is being stimulated by expansionary economic policy, which is helping investment to take off. Housing investment in particular is rising rapidly, with apartment starts at historically high levels. In the longer term this may help curb growth in house prices and, therefore, household debt.

Employment rate continues to climb

The share of the working-age population in employment is continuing to rise: an estimated 65.9 per cent of those aged 15-74 will be in work this year, up from a low of 64.4 per cent in 2010 following the financial crisis. Employment is expected to increase by around 1 per cent per year in 2014-2018. The labour force will also grow relatively quickly, however, and so unemployment will fall only slowly and will not reach the NIER’s estimate of the equilibrium level of 6.5 per cent until late 2017.

Low inflation

Inflation as measured by the CPIF (consumer price index with constant mortgage rates) was 0.4 per cent in May. The low level of inflation is due partly to the weak economic climate in Sweden and abroad making it hard for firms to raise prices. Inflation is therefore expected to remain low this year and then climb slowly to hit 2 per cent in 2018. The weak outlook for inflation means that the Riksbank will cut its repo rate to 0.50 per cent in July. Further low central bank policy rates abroad will contribute to the repo rate remaining low for a long period. A first rate hike in Sweden is not expected until late 2015.

For further information:

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

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