Sweden’s booming economy will not ‘overheat’
• Sweden hikes repo rate as economy booms
• Sweden’s economy booms – GDP up 6.9 percent
"The Swedish economy is growing at a record rate", the Swedish Riksbank said last week as it hiked its most important key interest for the fourth time since July. The economy increased 6.9 percent in the third quarter, its fastest rate since the statistics agency began its quarterly measurements in 1970.
But unlike many other countries with booming economic growth, inflation and overheating at the labour market is not a major worry for the Swedish recovery, the National Institute of Economic Research, NIER, said Tuesday.
The positive tendency of the labour market is expected to continue, boosted by the construction and service industries. Still, unemployment will recede rather slowly and will still be 7.5 percent at the close of 2012. Consequently, employment can increase without overheating the labour market.
At the same time inflation will be under pressure from lower rate of increase in earnings, higher growth in productivity and a stronger krona.
There is accordingly room for further stimuli of demand by the government.
“The need to stimulate demand will be greatest in the near future, when resource utilization in the economy is low”, the organization pointed out.
The economy will increase this year at the high rate of 5.6 percent, NIER said in its report. Although growth will fall off considerably in the period ahead, it will still be strong in the next two years at 3.8 percent in 2011 and 2.9 percent in 2012.
| Selected Indicators | 2009 | 2010 | 2011 | 2012 |
|---|---|---|---|---|
| GDP at market prices | –5.3 | 5.6 | 3.8 | 2.9 |
| GDP, calender-adjusted | –5.2 | 5.3 | 3.8 | 3.3 |
| Real GNI per capita | –7.5 | 4.2 | 3.0 | 2.1 |
| Current account (Percent of GDP) | 6.8 | 6.2 | 6.3 | 6.0 |
| Number of hours worked (Calendar-adjusted) | –2.6 | 2.0 | 1.6 | 0.9 |
| Employment | –2.3 | 1.1 | 1.6 | 0.8 |
| Unemployment (1) | 8.4 | 8.5 | 7.9 | 7.6 |
| Labour market gap | –3.6 | –2.9 | –2.1 | –1.6 |
| Hourly earnings, business sector (2) | 3.2 | 2.4 | 2.7 | 3.3 |
| Cost of labour, business sector | 2.3 | –0.6 | 4.0 | 3.5 |
| Productivity, buisness sector | –4.2 | 3.9 | 2.7 | 2.6 |
| CPI | –0.3 | 1.3 | 2.2 | 2.2 |
| CPIF | 1.9 | 2.1 | 1.6 | 1.6 |
| Repo rate (At year-end) | 0.25 | 1.25 | 2.00 | 2.75 |
| Interest rate, 10-year government bonds (At year-end) | 3.2 | 3.1 | 3.9 | 4.4 |
| Index for the Swedish krona (KIX) (At year-end) | 120.3 | 110.3 | 108.8 | 107.5 |
| General government net lending (Percent of GDP) | –1.0 | –0.8 | 0.0 | 0.1 |
| Cyclically adjusted net lending (Percent of GDP) | 2.0 | 1.3 | 1.4 | 1.0 |
(1) Including full-time students who have looked for work, in percent of labour force.
(2) According to Short-Term Earnings Statistics.
Sources: Statistics Sweden, National Mediation Office and NIER.
Last Updated (Tuesday, 21 December 2010 12:13)
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