2015-03-25

Swedish Economy March 2015

Brighter outlook for exports and the economy

The global recovery and relatively weak krona are helping Swedish exports pick up after several weak years. Exports are expected to increase by around 5 per cent in each of the next two years, with the result that GDP will grow by more than 3 per cent both this year and next. Such are the results of the latest forecast from the National Institute of Economic Research (NIER).

Economic recovery has been held back by weak external demand hampering Swedish exports and curbing growth in activity. Higher employment, rising real wages and tax reductions have stimulated household consumption, but the saving rate has also climbed to record levels.

There are now cautiously positive signals that the global economy is improving, albeit slowly. In the euro area, the recovery appears to be on a firmer footing, thanks partly to lower oil prices and the ECB´s more resolute monetary policy response.

This is good news for the Swedish labour market, and both recruitment plans and new vacancies are at high levels. Employment is therefore expected to rise by 1.4 per cent this year and continue to climb at around the same rate in 2016 and 2017.

Meanwhile, strong population growth will mean that the labour force expands rapidly, and so unemployment will fall only slowly towards 7 per cent in 2017.

Fiscal policy to tighten as the economy improves

Fiscal policy has been expansionary since the economic slump began in 2008, leading to a gradual erosion of government finances. Since the government´s “krona for krona" principle is expected to be retained in the coming years, structural net lending will improve.

If the public sector undertaking is to be maintained at 2015 levels, spending increases and equivalent tax increases averaging around SEK 25 billion per year will be needed in 2016-2019. Net lending will nevertheless be well below the surplus target.

Selected Indicators

 

2013

 

2014

 

2015

 

2016

 

2017

 

2018

 

2019

 

GDP, market price

1.3

2.1

3.1

3.3

2.2

1.7

1.7

GDP, calendar-adjusted

1.3

2.3

2.9

3.1

2.5

1.8

1.8

Global GDP

3.3

3.5

3.6

3.9

4.0

3.9

3.9

Current account (1)

6.9

5.8

6.1

6.2

5.9

5.3

5.0

Hours worked (2)

0.3

1.8

1.5

1.7

1.7

0.9

0.5

Employment

1.0

1.4

1.4

1.4

1.5

0.9

0.5

Unemployment (3)

8.0

7.9

7.8

7.4

6.8

6.7

6.8

Labour market gap (4)

–1.9

–1.3

–1.0

–0.5

0.1

0.2

0.0

Output gap (5)

–2.2

–1.6

–0.9

0.

0.4

0.2

0.0

Hourly earnings (6)

2.5

2.9

2.9

3.2

3.2

3.2

3.3

Hourly labour cost (2)

2.1

1.9

2.9

3.7

3.2

3.2

3.3

Productivity (2)

0.9

0.4

1.4

1.4

0.8

0.9

1.3

CPI

0.0

–0.2

0.2

1.1

2.8

3.1

2.9

CPIF

0.9

0.5

1.0

1.6

2.0

2.3

2.2

Repo rate (7,8)

0.75

0.00

–0.40

–0.25

0.75

1.25

1.75

Interest rate, 10-year government bond (7)

2.1

1.7

0.9

1.7

2.5

3.2

3.8

Effective krona exhange rate index (KIX) (9)

103.0

106.8

113.6

112.7

109.8

106.8

103.8

General government net lending (1)

–1.4

–2.1

–1.5

–0.9

–0.5

–0.4

–0.3

Structrural net lending (10)

–0.9

–1.6

–1.1

–0.6

–0.6

–0.5

–0.3

General government consolidated gross debt (Maastricht debt) (1)

38.6

40.6

41.0

39.9

39.2

38.6

37.9

Percentage changes unless otherwise stated

Sources: Statistics Sweden, National Mediation Office and NIER.
Footnotes:

  1. Percent of GDP
  2. Calendar-adjusted
  3. Percent of labour force
  4. Difference between actual and potential hours worked as percent of potential hours worked
  5. Difference between actual and potential GDP as percentage of potential GDP
  6. According to Short-term Wage Statistics
  7. Percent
  8. At year-end
  9. Index 1992-11-18=100
  10. Percent of potential GDP

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