Economic downturn ahead for the Swedish economy
SWEDEN, August 18 – Russia’s illegal invasion of Ukraine has led to increased economic uncertainty. According to the latest economic forecast from the Ministry of Finance, an economic slowdown is expected both in Sweden and around the world. Finance Minister Mikael Damberg presented the forecast during government deliberations in Harpsund today.
The Swedish economy is expected to grow by 2.3% this year, which is slightly higher than the previous June finance ministry forecast. However, GDP growth is expected to be weaker next year and fall to 0.4%. The main reason for the low growth rate is the very weak growth in household consumption.
“We see that the Swedish economy is heading towards an economic slowdown, with weaker growth, high inflation and high unemployment. We are facing a watershed moment that will require responsible fiscal prioritization and policy,” Damberg said.
The labor market has been strong over the past year and the employment rate is high. The Swedish labor market will therefore be in a strong position when economic activity slows down. However, as growth slows, job growth is expected to weaken and unemployment to rise.
The forecast is uncertain. Supply and price developments for key commodities such as gas have become more uncertain following Russia’s invasion of Ukraine. Uncertainty about the development of the supply situation in the commodity and energy markets makes it difficult to assess the duration of inflation in Sweden and the rest of the world.
Solid public finances
There will be a further strengthening of public finances in 2023-2025, largely thanks to the government’s forecasting principles, which means that only adopted and announced changes in tax regulations and state expenditure are taken into account. . The level of public debt will also continue to decline over the next few years and, from an international perspective, Sweden’s public debt will remain very low.
“Thanks to a responsible fiscal policy, Sweden has a low level of public debt. It is an important guarantor to strengthen Sweden’s economic credibility in these troubled economic times and allows us to meet the challenges Sweden is facing. This gives Swedish households, businesses and Sweden as a whole strong buffers in this time of economic uncertainty,” Mr Damberg said.
Economic Policy Directorate
The scope for reform for next year is estimated at around SEK 30 billion, but the future economic landscape is uncertain. The impact on public finances is difficult to assess given inflation and economic uncertainty.
“We are facing a decisive moment. Swedish households are already feeling the pressure of higher prices hitting their pockets. We need responsible fiscal policy that does not increase inflation and worsen the economic situation. But we must also support those affected by price increases and those with extremely tight budgets by taking effective and appropriate action,” said Damberg.