Tough times ahead for Sweden’s economy
SWEDEN, June 22 - Minister for Finance Mikael Damberg today presented the Ministry of Finance’s latest forecast for the economic situation. Due to high inflation and rising interest rates, growth is expected to slow in the second half of the year. The labour market remains strong, but unemployment is expected to level off next year.
– Russia’s invasion of Ukraine has driven up energy and food prices globally and in Sweden. High inflation and rising interest rates are expected to slow growth in the coming years, says Minister for Finance Mikael Damberg.
High inflation and rising interest rates impact household purchasing power and thus private consumption will slow substantially both this year and next. Exports and investment are also expected to grow at a slower rate going forward. Growth in Sweden is expected to be 1.9 per cent in 2022 and 1.1 per cent in 2023 before increasing to 2.1 per cent in 2024.
The labour market situation has improved significantly after the pandemic. Indicators point to increased employment in the short term, but employment is expected to increase at a slower rate starting in the second half of the year. Unemployment is expected to continue to decrease somewhat this year before levelling off at 7.4 per cent in 2023, which is a somewhat higher level in comparison with the assessment from the forecast in the Spring Fiscal Policy Bill.
The level of uncertainty in the forecast is however high. Russia’s invasion of Ukraine creates uncertainty regarding supply and price trends for important commodities. The reduced supply of gas to Europe, for example, has a further impact on Sweden’s economy. It is also uncertain what actions central banks around the world will take to slow inflation, particularly if high inflation is prolonged.
– The economic situation is uncertain, and we can expect tough times ahead of us. Russia’s war has driven up prices, not least on energy and food, which particularly impacts those who were already in a difficult economic situation. It is therefore important that financial policy support households with the weakest finances, says Minister for Finance Mikael Damberg.
Savings in public finance are expected to be strengthened during the forecast period. At that time, the public finance surplus will contribute to reduced public sector debt. Sweden’s gross debt as a percentage of GDP is among the lowest of the EU Member States, which means that the Swedish economy is resilient.
The forecast is based on the information available as of 9 June.
