Service sector to boost Swedish economy
A drink in the bar might help the Swedish economy to recover.
RELATED NEWS:
• Large Swedish enterprises on the way up
The service industries will contribute strongly to the Swedish economy growth in the next few years and domestic demand will play a greater role in the current recovery than after previous economic downturns, the National Institute of Economic Research said Wednesday.
Earlier this week the opposition Green Party said it wanted to slash sales tax on the service sector - including household services, restaurants, hairdressers and bicycle repairs – in a move to boost the nation’s economy, create new jobs and "move on from the current consume and discard society".
"It should be cheaper to fix broken things, to eat in restaurants, go to the hairdresser or fix your bike," the party wrote in a election manifesto proposal, which immediately got standing ovations from the Swedish Hotel & Restaurant Association (SHR).
If restaurant tax was cut from today's 25 percent to 12 percent some 10,000 new jobs could be created in the sector, according to The Swedish Retail Institute, SHR points out in a statement.
On the back of increasing domestic demand the service sector has begun to pick up, the research institute said in its NIER report. This development is being fuelled by an expansionary economic policy, with low interest rates and cuts in income taxes.
After suffering its largest annual setback in more than half a century last year, when GDP shrank 4.9 percent year-on-year, Sweden's economy is now expected to grow by 2.4 percent this year and 3.8 percent next year.
Households are also expected to increase their consumption both this and next year.
The labour market is still a crux for economic recovery. Unemployment will remain above 9 percent in both 2010 and 2011. The Swedish economy will not return to cyclical balance until 2014, when the unemployment rate is expected to be around 6.8 percent.
Starting in September, the Riksbank will gradually begin raising interest rates. At the end of 2011, the repo rate will be 1.75 percent. Inflation will be modest and rise slowly after 2011.
| 2008 | 2009 | 2010 | 2011 | |
| GDP at market prices | –0,2 | –4,9 | 2,4 | 3,8 |
| GDP, calendar-adjusted | –0,2 | –4,9 | 2,4 | 3,8 |
| Real GNI per capita | 0.1 | –7.5 | 1.3 | 3.3 |
| Current account (1) | 9.5 | 7.2 | 6.0 | 6.8 |
| Number of hours worked (2) | 1.0 | –2.6 | –0.2 | 0.7 |
| Employment | 0.9 | –2.3 | 0.0 | 0.4 |
| Unemployment (3) | 6.1 | 8.4 | 9.1 | 9.1 |
| Labour market gap | –0.1 | –3.9 | –4.9 | –4.6 |
| Hourly earnings, business sector (4) | 4.0 | 3.1 | 2.3 | 2.3 |
| Cost of labour, business sector (2) | 3.0 | 3.1 | 1.6 | 2.8 |
| Productivity, business sector (2) | –2.4 | –3.4 | 2.7 | 4.0 |
| CPI | 3.4 | –0.3 | 1.0 | 1.6 |
| CPIF | 2.7 | 1.9 | 1.9 | 1.3 |
| Repo rate (5) | 2.00 | 0.25 | 0.75 | 1.75 |
| Interest rate, 10-year government bonds (5) | 2.7 | 3.2 | 4.0 | 4.4 |
| Index for the Swedish krona (KIX) (5) | 124.6 | 120.3 | 113.2 | 110.2 |
| General government net lending (6) | 2.5 | –0.7 | –1.2 | –1.1 |
| Cyclically adjusted net lending (7) | 3.7 | 3.2 | 2.5 | 2.0 |
(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 Earnings Statistics.
(5) At year-end.
(6) Percent of GDP.
(7) Percent of potential GDP.
Sources: Statistics Sweden, National Mediation Office and NIER.
Last Updated (Wednesday, 31 March 2010 10:43)
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