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Sweden bullish about prospects for growth

The Swedish government released a more optimistic forecast for the economy on Wednesday, announcing it expects the country’s GDP to climb by 3.0 percent in 2010.

Published: 27 January 2010 14:45 CET

In its previous forecast, presented in November, the government projected that the Swedish economy would only expand by 2.0 percent this year.

According to the new forecast, however, the economy is expected to grow by 3.0 percent in 2010, 3.6 percent in 2011, and 3.2 percent in 2012.

Unemployment will also continue to rise in 2010, however, reaching 9.5 percent before dropping down to 8.9 percent in 2011 and 7.6 percent in 2012.

Meanwhile, inflation is also expected to creep up in the following years, with consumer prices inching up by 1.3 percent in 2010, 2.1 percent in 2011, and 2.7 percent in 2012, according to the government’s new forecast.

Finance minister Anders Borg admitted even he was surprised when his colleagues presented him with the new unemployment projections.

“It’s quite a strong downward revision of more than 4 percent, if you look a few years down the road,” he said at a Wednesday press conference.

“We’re going to be at a level of around 4 to 5 percent unemployment within a few years.”

Public finances are also expected to improve more quickly than previously thought. In December 2009, Borg projected the state’s budget would come out of its current deficit by 2013 before heading into 1 percent surplus in 2014.

“My assessment is that we can reach a balance earlier and that the surplus will be greater than 1 percent in 2014,” said Borg.

Despite the rosier projections, Borg was careful about promising additional reforms during the next government term, even if public finances reach a surplus.

He added, however, that he doesn’t plan to tighten fiscal policy in 2011 and 2012 if still in office, mentioning temporary measures to dampen the effects of the financial crisis for certain segments of society who have seen their economic situation deteriorate as possible areas where additional government spending may occur.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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