Economic measures in response to COVID-19
Published · Updated
The spread of the COVID-19 virus is a global emergency for people’s lives and health. At the same time, the outbreak is having major effects on the economy in Sweden and globally. To mitigate the effects of the COVID-19 outbreak and to reduce the spread of the virus, several economic measures have been taken.
Due to the extraordinary situation and the fast-moving pace of events, further measures to strengthen the fight against the virus outbreak and its consequences may rapidly need to be taken.
The measures taken so far in response to the COVID-19 virus are outlined below.
Crisis package for jobs and transition
On 30 March, the Government, the Centre Party and the Liberal Party, presented further measures to alleviate the impact of the virus outbreak on jobs and the economy in Sweden.
The measures include a temporary reinforcement of the unemployment insurance. It is proposed that increased funding be paid to Arbetsförmedlingen (the Swedish public employment service) and labour market policy programmes. Furthermore, more places and more distance learning at higher education institutions are proposed, as well as more opportunities for vocational education and training throughout the country.
It is proposed that the income ceiling for health and medical students receiving student aid be temporarily removed in order for those students to support the healthcare sector without their student aid being reduced.
Crisis package for small enterprises in Sweden
To particularly alleviate the impact for small and medium-sized enterprises, a crisis package was presented by the Government on 25 March.
The package include a central government loan guarantee to make it easier for companies to access financing. The proposal means that the central government will guarantee 70 per cent of new loans banks provide to companies that are experiencing financial difficulty due to the COVID-19 virus but that are otherwise robust.
Furthermore, temporary reduction of employers’ social security contributions will be proposed for the period 1 March to 30 June 2020 so that only the old age pension contribution is paid.
To reduce costs for companies with considerable difficulties as a result of the COVID-19 virus – in sectors such as durable consumer goods, hotels, restaurants and certain other activities – the Government proposes providing support that aims to facilitate and speed up renegotiation of rents. The approach is that central government will cover 50 per cent of the rental reduction up to 50 per cent of the fixed rent.
Moreover, the rules for tax allocation reserves will be temporarily changed so that sole proprietors severely affected by the COVID-19 outbreak will receive tax cuts. The new rules mean that 100 per cent of the taxable profits for 2019, up to SEK 1 million, can be set aside in the tax allocation reserve, which can then be set off against possible future losses. This means that many people can get back the preliminary tax they paid in 2019. Furthermore, the previously presented proposal on new opportunities to defer tax payments will be expanded. This means that value added tax reported annually from 27 December 2019 until 17 January 2021 will also be covered by the proposal.
Increased loan facilities and credit guarantees for Swedish businesses
On 20 March, a range of measures were presented to make it easier for Swedish businesses, particularly small- and medium-sized businesses, to access finance at this difficult time. Almi Företagspartner AB will receive a capital contribution of SEK 3 billion to increase its lending to small- and medium-sized businesses throughout the country. The Swedish Export Credit Corporation’s credit framework will be increased from SEK 125 billion to SEK 200 billion and can be used to provide both state-supported and commercial credit to Swedish export companies. Furthermore, the Swedish Export Credit Agency will decide on credit guarantees that entail new and improved credit opportunities for businesses.
The proposals are based on an agreement between the Government, the Centre Party and the Liberal Party.
SEK 1 billion to culture and sport
On 20 March, the Government proposed an extra SEK 1 billion to the cultural sector and sports movement in support due to the economic consequences affecting these sectors as a result of the spread of the COVID-19 virus.
The proposal is an agreement reached between the Government, the Liberal Party and the Centre Party, and the money will be distributed by grant-allocating agencies in the area of culture and by the Swedish Sports Confederation.
Additional amending budget: Credit guarantees for airlines due to SARS-CoV-2
On 17 March, the Government proposed that airlines be able to receive credit guarantees in 2020 amounting to a maximum of SEK 5 billion, of which SEK 1.5 billion is intended for SAS. The proposal is presented in an additional amending budget. Also proposed in the budget is that the Swedish Export Credit Agency’s credit guarantee framework be expanded to support Swedish export companies and, by extension, the shipping industry. The proposal is based on an agreement between the Government, the Centre Party and the Liberal Party.
Additional amending budget: Crisis package for Swedish businesses and jobs
On 11 March, the Government, the Centre Party and the Liberal Party presented an additional amending budget for 2020. On 16 March, the Government described the new initiatives that will be included in that budget.
The Government presented a bill on the additional amending budget to the Riksdag on 19 March.
Municipalities and regions to receive compensation
Central government will compensate municipalities and regions for extraordinary measures and extra costs in health and medical care associated with the COVID-19 virus. For example, this could mean higher staffing costs, higher costs to ensure staffing of 1177 Vårdguiden, laboratory analyses, extra consumption of supplies, contact tracing, etc.
Sick pay standard deduction to be discontinued
To reduce the risk of the virus spreading in society, the sick pay standard deduction will be discontinued for two months between 11 March and 31 May in that central government will pay sickness benefit from the first day of sickness.
Additional funding for relevant government agencies
The Public Health Agency of Sweden will receive an additional SEK 41 million, primarily for staffing costs. The National Board of Health and Welfare will receive an additional SEK 20 million, primarily for staffing costs, training activities and supplies. The Swedish Medical Products Agency will receive an additional SEK 5 million for its efforts, together with the regions, to ensure the supply of medicines in Sweden. This additional sum corresponds to the Agency’s own estimate of what is currently needed. Furthermore, the National Board of Health and Welfare’s credit framework will be trebled from SEK 100 million to SEK 300 million to enable it to purchase protective equipment and testing kits.
The Swedish Civil Contingencies Agency will also receive funds to rapidly produce national information material and disseminate it to all households.
The appropriation for disease carrier’s allowance to be increased
Resources for the ‘disease carrier’s allowance’ will be increased, as it is assumed that the number of individuals entitled to this benefit will increase.
Central government to assume sick pay responsibility for two months
It is proposed that central government assume the entire cost of all sick pay during April and May. Self-employed persons will also be compensated in that they can receive standardised sick pay for days 1–14.
Liquidity reinforcement via tax accounts proposed
Under this proposal, companies can defer payment of employers’ social security contributions, preliminary tax on salaries and value added tax that are reported monthly or quarterly. The payment respite covers tax payments for three months and is to be granted for up to 12 months. It is proposed that the new regulations will take effect on 7 April 2020, but can be retroactively applied from 1 January 2020. This means that companies that have paid into their tax account for January to March can receive repayment of the tax from the Swedish Tax Agency.
A new system for short-term layoffs to be introduced
The proposal on short-term layoffs is based on a previous proposal on a new system of support in the event of short-time work, but the degree of subsidy has been significantly increased. Central government will cover three quarters of the costs when staff working hours are reduced, compared with short-time work where central government covers one third of the costs. This proposal means that employers’ wage costs can be halved, while employees receive more than 90 per cent of their wage. The aim is for affected companies to be able to retain their staff and rapidly gear up again when the situation improves.
Other measures that have been taken to mitigate the economic effects and safeguard the stability of the financial system
The Riksbank is loaning up to SEK 500 billion to companies via the banks to safeguard the supply of credit to Swedish companies. During the year, the Riksbank also intends to buy securities for up to an additional SEK 300 billion.
Finansinspektionen (the Swedish financial supervisory authority) is lowering the countercyclical capital buffer for banks from 2.5 per cent to 0 per cent to safeguard a well-functioning credit supply and help companies and households to keep up production, consumption and investment.
The heading "Qualifying day for sick pay to be discontinued" has been changed to ”Sick pay standard deduction to be discontinued”.