Rising consumption to aid Sweden's economy
Consumption-happy households to lead the way out of the crisis.
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Although Sweden is in a severe economic slump, and the economy is expected to drop by 4.4 percent next year, higher exports and rising consumption will improve the situation, the National Institute for Economic Research said in an upbeat report Friday, stating that GDP will grow 2.7 percent in 2010 and 3.3 percent in 2011.
“The economy has passed its low point largely because of expansionary fiscal and monetary policies, including tax cuts and low interest rates. Another positive factor is that world trade is recovering, entailing increased exports”, the reports said.
However, since global recovery will take time and the Swedish krona is appreciating, exports will not boost growth as much as in previous economic upturns. Instead, rising consumption will play a larger part.
Household disposable income will be up by more than 3 percent in 2009 and will continue rising in 2010 and 2011. Consumption will also increase due to lower household saving, which has been at historically high levels.
Still, rising unemployment is a growing headache for the country’s economy. Although the manufacturing sector has been hit hardest by lay-offs, redundancies are rapidly spreading to the service sector. Unemployment will exceed 10 percent for the next couple of years.
In view of the weak labour market, inflation is expected to stay low. Earnings in the business sector will increase by 2.3 percent in 2010 and by 2.2 percent in 2011. As cost pressure is decreasing and resource utilization is low, inflation will be slight in the period ahead.
“With low inflationary pressure and low resource utilization in the economy, the Riksbank will continue to follow a highly expansionary monetary policy”, the report suggests.
Annual percentage change and percent, respectively
| 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|
| GDP at market prices | –0.2 | –4.4 | 2.7 | 3.3 |
| GDP, calendar-adjusted | –0.5 | –4.3 | 2.4 | 3.3 |
| Real GNI per capita | 0.1 | –6.9 | 1.7 | 3.0 |
| Current account (1) | 9.6 | 7.5 | 6.9 | 7.4 |
| Number of hours worked (2) | 1.0 | –2.7 | –1.5 | 0.4 |
| Employment | 0.9 | –2.5 | –1.7 | 0.2 |
| Unemployment (3) | 6.1 | 8.5 | 10.1 | 10.4 |
| Labour market gap | –0.6 | –4.1 | –6.1 | –6.1 |
| Hourly earnings, business sector (4) | 4.0 | 3.1 | 2.3 | 2.2 |
| Cost of labour, business sector (2) | 3.0 | 2.4 | 2.1 | 2.3 |
| Productivity, business sector (2) | –2.4 | –2.2 | 5.4 | 3.7 |
| CPI | 3.4 | –0.3 | 0.5 | 1.7 |
| CPIF | 2.7 | 1.9 | 1.0 | 1.0 |
| Repo rate (5) | 2.00 | 0.25 | 0.75 | 1.75 |
| Interest rate, 10-year government bonds (5) | 2.7 | 3.3 | 4.0 | 4.4 |
| Index for the Swedish krona (KIX) (5) | 124.6 | 118.6 | 113.5 | 108.8 |
| General government net lending (6) | 2.5 | –1.5 | –2.5 | –2.3 |
| Cyclically adjusted net lending (7) | 4.1 | 3.1 | 1.9 | 1.7 |
| Seven-year indicator | 0.5 | 0.1 | –0.2 | –0.6 |
(1) Percent of GDP.
(2) Calendar-adjusted.
(3) Including full-time students who have looked for work, in percent of labour force.
(4) According to Short-Term Wage and Salary Statistics.
(5) At year-end.
(6) Percent of GDP.
(7) Percent of potential GDP.
Sources: Statistics Sweden, National Mediation Office and NIER.
Last Updated (Sunday, 27 December 2009 17:12)
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