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PRESS RELEASE |
THE SWEDISH ECONOMY. JUNE 2009 |
After Dropping Sharply, GDP to Stop Decreasing, but Unemployment to Rise Rapidly Until 2011
This year Sweden´s GDP will fall by 5.4 percent, the worst development since World War II. However, the slump in the Swedish economy will become less severe, and GDP will grow by 0.8 percent in 2010 and 2.5 percent in 2011. On the labour market some difficult years lie ahead. The number employed will decrease by300 000 in2009-2011. Manufacturing will be hit hard; manufacturing output will plummet by 25 percent this year, and the number employed in manufacturing will drop by 20 percent in 2009-2011. To prevent the labour market from weakening even further, expansionary fiscal policy will be needed, with additional unfinanced measures totalling SEK 45 billion in 2010 and SEK 10 billion in 2011.
Sweden has been hit hard by the international crisis, and GDP has fallen more in Sweden than in the OECD, the United States and the euro zone. A large share of Sweden´s output is on markets and in industries where the downturn was initially the most dramatic. After dropping sharply so far, GDP is expected to stop decreasing in the second half of 2009. As the international economic outlook improves, the Swedish economy will begin to grow as well. But despite expansionary fiscal and monetary policies, recovery will take time. The main reason is that the exporting industries will provide less of a boost to the Swedish economy this time than after a number of contractionary periods in the past. In 2011 exports will pick up, and the labour market will begin to stabilize. Unemployment will stop rising. GDP will fall by 5.4 percent in 2009, grow by 0.8 percent in 2010 and grow by 2.5 percent in 2011. Employment down by 300 000 persons in 2009-2011
Employment is plunging and will decrease by 300 000 persons from 2009 through 2011. Hardest hit will be manufacturing, where the number employed will drop during the forecast period by approximately 135 000, or 20 percent of those employed in that sector. Unemployment will soar in 2009 and continue upward in 2010, though somewhat more slowly. Unemployment will still be high in 2011, reaching almost 12 percent. As in the crisis of the 1990´s, the contracting economy is expected to have lasting negative effects on employment. Now as then, many will be unemployed for a relatively extended time. The longer someone remains out of work, the greater the risk of not rejoining the ranks of the employed. Expansionary fiscal policy in 2010 and 2011
The fiscal policy in effect thus far has limited the rise in unemployment. However, there is a need to provide more stimulus to demand. The NIER has assumed in the forecast that the Government will seek to combat the severe slump in the economy with additional unfinanced fiscal policy measures totalling SEK 45 billion in 2010 and another SEK 10 billion in 2011. The net lending of the general government sector will plummet from a record-high level. When the expansionary fiscal policy is taken into account, net lending will drop from 2.5 percent in 2008 to —4.3 percent in2011. In2010 the financial deficit will be the largest since1995. Inthe NIER´s opinion, however, the financial position of the general government sector is strong enough to justify maintaining the expansionary stance of fiscal policy. The repo rate is expected to remain low for a considerable time to come.
Table: Selected IndicatorsAnnual percentage change and percent, respectively
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| GDP at market prices
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–0.2
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–5.4
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0.8
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2.5
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| GDP, calendar-adjusted
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–0.4
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–5.3
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0.5
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2.5
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| Real GNI per capita
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–1.0
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–7.5
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–0.5
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2.1
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| Current account (1)
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8.3
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5.8
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5.1
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5.2
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| Number of hours worked (2)
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1.0
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–3.6
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–3.5
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0.1
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| Employment
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0.9
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–3.2
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–3.4
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–0.4
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| Unemployment (3)
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6.1
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9.0
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11.5
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11.7
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| Labour market gap
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–0.1
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–3.7
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–6.9
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–7.3
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| Hourly earnings, business sector (4)
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4.0
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3.3
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2.1
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2.2
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| Cost of labour, business sector (2)
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3.0
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2.9
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1.7
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2.4
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| Productivity, business sector (2)
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–2.4
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–2.1
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5.7
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3.1
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| CPI
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3.4
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–0.3
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0.8
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1.6
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| CPIF
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2.7
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1.7
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1.1
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1.0
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| Repo rate (5)
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2.00
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0.25
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0.25
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1.75
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| Interest rate, 10-year government bonds (5)
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2.7
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3.7
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3.9
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4.3
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| Index for the Swedish krona (KIX) (5)
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124.6
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119.8
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113.8
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108.0
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| General government net lending (6)
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2.5
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–2.3
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–4.6
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–4.3
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| Cyclically adjusted net lending (7)
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3.8
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2.1
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0.8
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0.7
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(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.
Published: 17th June 2009
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Mats Dillén, Director General, tel: +46-8-453 59 66, cell: +46-768-01 52 22
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