2020-06-17

Swedish Economy Report June 2020

Pandemic to weigh on Swedish economy for at least another year

The COVID-19 pandemic means that Sweden’s GDP will fall by around 10 per cent in the second quarter. The downturn will be much greater in the euro area, for example. One reason why the Swedish economy has not been hit quite as hard in the second quarter is that the Swedish authorities’ measures to limit the spread of infection have been less far-reaching than in many other countries.

The downturn in Sweden is also being alleviated by the economic policy measures introduced. Employment is being propped up by extensive short-time working, with an average of around 450,000 workers expected to be enrolled in the programme in the second, third and fourth quarters of 2020.

Various other steps are also being taken to help firms ride out the in many cases severe drop-off in demand as a result of COVID-19. These support measures will cause general government net lending to deteriorate sharply this year to -5.6 per cent of GDP.

Next year, the economy will pick up and net lending will improve slightly as infections subside and vaccination against COVID-19 is assumed to begin during the autumn. The pandemic will, however, continue to weigh on the Swedish economy for at least another year. The substantial government deficits mean that Maastricht debt will rise to 46 per cent of GDP next year. Government finances can therefore still be considered comparatively strong despite the particularly deep economic downturn.

Selected indicators


2019

2020

2021

2022

2023

2024

GDP, Market Prices

1.2

–5.4

3.5

4.1

2.6

2.1

GDP per Capita

0.2

–6.3

2.7

3.3

1.9

1.4

GDP. Calendar-Adjusted

1.2

–5.7

3.4

4.1

2.9

2.1

GDP. World

2.9

–5.9

4.5

4.1

3.5

3.3

Current Account Balance (1)

4.1

4.9

3.6

3.3

2.9

2.6

Hours Worked (2)

–0.3

–5.2

2.1

2.4

1.9

1.2

Employment

0.7

–1.9

–0.7

1.8

1.7

1.3

Unemployment Rate (3)

6.8

8.5

9.6

8.7

7.8

7.2

Labour Market Gap (4)

0.1

–5.1

–3.3

–1.6

–0.6

–0.1

Output Gap (5)

0.8

–6.3

–3.8

–1.3

–0.3

0.0

Hourly Earnings (6)

2.6

1.8

2.2

2.3

2.7

3.0

Hourly Labour Costs (2.7)

3.7

5.2

–0.7

2.3

2.7

3.0

Productivity (2)

1.7

–0.7

1.3

1.7

1.0

0.9

CPI

1.8

0.4

1.1

1.4

1.8

2.2

CPIF

1.7

0.4

1.1

1.4

1.7

1.9

Repo Rate (8.9)

–0.25

0.00

0.00

0.00

0.00

0.50

10-year Government Bond Yield (8)

0.1

0.0

0.4

0.7

1.1

1.5

Effective Krona Exchange Rate Index (KIX) (10)

122.1

120.3

118.0

116.5

115.1

113.6

Government Net Lending (1)

0.3

–5.6

–3.6

–2.0

–0.7

0.2

Structural Net Lending (11)

0.3

–3.3

–1.6

–1.0

–0.3

0.3

Maastricht Debt (1)

35.2

44.2

46.4

46.6

46.0

44.8

  1. Per cent of GDP.
  2. Calendar-adjusted. 
  3. Per cent of labour force.
  4. Difference between actual and potential hours worked in per cent of potential hours worked.
  5. Difference between actual and potential GDP in per cent of potential GDP.
  6. According to the short-term earnings statistics. 
  7. Refers to the hours of employees
  8. Per cent.
  9. At year-end. 
  10. Index 18 November 1992=100. 
  11. Per cent of potential GDP.

Sources: IMF, Statistics Sweden, National Mediation Office, Sveriges Riksbank, Macrobond and NIER.