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ECONOMY

Slower growth ahead for Swedish economy: report

Sweden's economic growth is expected to slow further in 2011 following record strong growth in 2010, according to a new forecast from the Sweden's National Institute of Economic Research (NIER).

Published: 22 June 2011 13:34 CEST

The group expects Sweden’s GDP to grow by 4.4 percent in 2011 and 2.9 percent in 2012.

At the same time, the NIER projects unemployment to decrease more slowly than previously expected, dropping to 7.5 percent this year, 7.2 percent in 2012, only falling down to more normal levels around 6 percent in 2015.

“We expect unemployment will fall at a relatively slow pace,” NIER head Mats Dillén told the TT news agency.

In March, the institute forecast the Swedish economy would grow by 4.2 percent in 2011 and 3.1 percent in 2012.

“Now we’re coming into a more normal recovery phase which is dampened a bit in the short term by a number of temporary factors,” said Dillén.

Despite the lower growth, Sweden’s economy remains “more favourable” for growth than most other OECD countries, according to the institute.

It expects business investment to rise rapidly in the coming years, and for Sweden to achieve an average annual growth rate of 3 percent between 2013 and 2015.

Sweden won’t be back in a normal economic situation until 2014, according to the NIER. As a result, the institute argues for a continuation of expansionary economic policy in the coming years.

It expects the government to carry out a total of 30 billion kronor ($4.7 billion) in unfunded spending in 2012 and an additional 55 billion for the following three years.

“Our assessment is that we’re still in an economic slump where unemployment is higher than normal. Therefore there’s a need for stimulus, first from monetary policy but there is also some room for fiscal police stimulus,” said Dillén.

According to the NIER, the Riksbank’s benchmark interest rate, the repo rate, will reach 2.5 percent at the end of 2011 before notching up to 3.0 percent at the end of the following year.

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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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