Record-High Growth Falling Off
Growth is slackening this year after a record surge in 2010. At the same time, unemployment is decreasing more slowly and will not come down to 6 percent until 2015. Maintaining an expansionary economic policy in the next few years will helpSweden to emerge from the recession more quickly. This is shown in the NIER’s forecast, published today.
First-quarter growth fell off, with household consumption in particular rising more slowly. For the rest of the year, growth will soften somewhat further as firms replenish their inventories to a lesser extent and exports increase more gradually. Several temporary factors may explain the weaker tendency. One is the devastating earthquake in Japan, which has disrupted production. Another is the political unrest in North Africa and the Middle East, which has pushed up oil prices. A third factor is the uncertainty about government finances in Greece. But despite troubles elsewhere, the strong finish in 2010 has prepared the way for Sweden’s GDP to grow calendar-adjusted by 4.5 percent this year.
Consumption and investment driving growth
Conditions for growth are significantly more favourable in Sweden than in most other OECD countries. Swedish household saving is relatively high, leaving a margin for further consumption. And business investment, which has not yet fully recovered from the financial crisis, will rise rapidly in the period ahead. As a consequence, GDP will increase by 3.3 percent in 2012 and by an annual average of 3 percent in 2013–2015.
On the labour market, hiring plans in the business sector suggest that employment will be rising. But as with GDP growth, the rate of increase will slacken. Even after surging last year and early this year, employment will go up this year by 2.4 percent, equivalent to 107 000 persons, and by another 50 000 in 2012. But since labour supply is also on the rise, unemployment will be relatively slow to decrease.
Expansionary economic policy to bring Sweden out of the recession more quickly
Although resource utilization on the labour market is rising, it remains low – a typical feature of an economic recovery – and the economy will not return to a normal state until 2014. An expansionary economic policy will thus be needed for the next few years. The NIER expects the Government to take unfunded measures totalling SEK 30 billion in 2012. By the end of 2012, the repo rate is forecast at 3.0 percent, which means that monetary policy will still be expansionary.
For further information:
Jesper Hansson, Director of Forecasting, +46 8 453 59 72
Sarah Hegardt Grant, Head of Communications, + 46 8 453 59 11, +46 70 267 80 41