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ECONOMY

Improved outlook for Swedish economy: report

Swedes should expect higher economic growth and lower unemployment than previously forecast, according to a new report from the National Institute of Economic Research (NIER).

Published: 1 September 2010 12:20 CEST

According to NIER, the Swedish economy will expand by 4.3 percent this year, up from the institute’s projections in June, when it forecast 2010 growth of only 3.7 percent.

NIER expects continued but more modest growth of 3.4 percent in 2011 and 3.0 percent in 2012, according to the new forecast released on Wednesday.

The new expected growth figures for 2011 and 2012 have also been revised upward from the June forecast of 3.0 percent growth in 2011 and 2.8 percent growth in 2012.

NIER expects Sweden’s benchmark interest rate, the repo rate, to rise to 1.0 percent by the end of the year before climbing up to 1.75 percent by the end of 2011.

According to NIER’s prognosis, the repo rate will increase by another percentage point to 2.75 by the start of 2012.

“With the recovery of the world economy, Swedish exports have surged. Rising household consumption and business investment are also helping to strengthen the economy,” the institute said in a statement.

NIER also expects Sweden will add 140,000 more jobs by 2012.

“Taken together, these factors will mean high growth figures for the entire forecast period. Despite vigorous growth, however, unemployment will be high for the next few years. It will therefore be necessary to maintain an expansionary economic policy,” said NIER.

The unemployment rate is expected to be 8.5 percent this year, before edging downward to 8.2 percent in 2011 and then further to 8.0 percent in 2012.

Nevertheless, the seemingly higher jobless rate is an improvement from NIER’s earlier prognosis, which included a 2010 unemployment forecast of 8.9 percent, 8.8 percent in 2011, and 8.5 percent in 2012.

Inflation meanwhile, as measured by the consumer price index, is expected to be 1.1 percent this year before climbing to 1.6 percent in 2011.

According to NIER’s forecast, Swedish prices will be rising at a rate of 2.1 percent by 2012.

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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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