Swedbank Economic Outlook: Strong growth in sight
The recovery in the Swedish economy has continued at the beginning of 2021, although the pandemic is still weighing down parts of the service sector. However, vaccinations are ongoing and growth will accelerate during the second half of this year and continue in 2022, according to the latest Swedbank Economic Outlook.
“The COVID-19 pandemic has not yet loosened its grip on Sweden and healthcare remains under tough pressure, but vaccinations are underway. Restrictions are expected to be eased gradually in the coming months, so long as the spread of coronavirus has declined significantly by then. Sweden is at the beginning of a considerable recovery where we expect household consumption to be one of the driving forces. The recovery will also get an extra boost from strong global growth,’’ says Swedbank Group Chief Economist Mattias Persson.
Swedbank’s latest forecast is that global growth will accelerate going forward. Growth prospects have been broadly revised up, especially the growth in the US. Global growth is expected to increase by 5.9% in 2021. The Swedish economy is expected to grow by 3.6%, an increase compared to our forecast in January of 3%. Growth will accelerate during the second half of the year and unemployment will fall from today’s level of 8.9% to 7.3% by the end of 2022. The main risks to the forecast are related to side effects of the COVID-19 vaccines; vaccine delivery problems; and new virus mutations
“Inflation will increase globally soon, but our view is that it will only be a temporary increase. Long-term interest rates will continue to rise somewhat. In the Swedish economy, the immediate need is for an economic policy that addresses the challenges on the labour market, where the increase in long-term unemployment is worrisome. There is also a need for investments for an ageing population as well as investments for the green transition,’’ Mattias Persson says.
Swedbank expects a continued expansionary fiscal policy with additional measures of SEK 180 billion during 2021 and SEK 60 billion during 2022. This year, the public debt level will reach 39.5 percent, which is a low debt level after this crisis, not least in an international comparison.
The Riksbank is expected to keep the repo rate unchanged during the forecasting period, to continue increasing its asset purchases this year, and thereafter to keep its level of assets unchanged during 2022.
“The Riksbank needs to continue with an expansionary monetary policy in order to support economic development. Inflation will rise in the near future, but the increase will be driven primarily by temporary factors also in Sweden. We believe that inflation will come down again during 2022,’’ Mattias Persson says.
Link to the report: www.swedbank.com/seo
Mattias Persson, Group Chief Economist, Swedbank, tfn +46 73 094 29 56
Unni Jerndal, Head of Group Press, Swedbank, tfn +46 73 092 11 80