Article from Ministry of Finance

Economic measures on account of the pandemic 2020–2021

Published

Since the infection started to spread, the Government and the Riksdag have taken a large number of measures to safeguard people’s lives, health and livelihoods. At the same time a powerful green restart of the Swedish economy is being implemented. In all, the economic measures taken are worth almost SEK 400 billion for 2020 and 2021. This corresponds to around SEK 40 000 per inhabitant. In addition, around SEK 1 000 billion has been made available in various forms of loans and guarantees.

Resources to municipalities and regions

Municipalities and regions have received considerable resources for additional costs resulting from COVID-19 so as to support the management of deferred health care and to alleviate the consequences of the loss of tax revenue caused by the recession. The regions have been allocated major resources to enable them to carry out large-scale testing and tracing and to implement the largest vaccination programme in Swedish history. Funds have also been allocated to strengthen care of older people and to raise staff skills. Overall, general government grants have been raised more than local government tax income has decreased (see figure 1.1)

Tabellrubrik
ÅrTax revision since forecast in Budget Bill for 2020Revision of general government grants since forecast in Budget Bill for 2020
2020-729
2021325
2022523

The figure compares the forecasts of local government tax income and general government grants in 2020, 2021 and 2022 given in the Budget Bill for 2020 with the outcome for 2020 and forecast for 2021 and 2022 presented in this bill. The columns thus correspond to how much the forecasts for local government tax income and general government grants made before the pandemic have been revised up until the updated forecast in the bill.

Sources: Statistics Sweden and own calculations.

Financial support to companies and individuals

Behavioural change and restrictions have resulted in a severe downturn in the economy. Companies have received financial support to be able to overwinter the crisis and avoid redundancies (see figure 1.2). The measures have reduced costs, strengthened liquidity and improved access to financing for companies. The funds have mainly been distributed on the basis of how seriously the companies have been affected financially, but some forms of support have been targeted at specific sectors, such as media, culture, sport, public transport, railways, and aviation and shipping. Temporary and front-loaded tax reductions for jobs and businesses have also been implemented in 2021. The costs of hiring have been reduced by temporarily reducing employers’ social security contributions for 19– 23 year olds and other groups. Civil society has received increased resources and the housing allowance for families with children has been raised temporarily. Funds have also been provided for organisations working with children at risk.

Tabellrubrik
DeferralsShort-time workingReduction of employers’ social security contributionsCompensation for high sick pay costsTransition supportReduction of employers’ social security contributions, young peopleCredit guarantee scheme
Stöd50,8850998436,35629,8817,8112,678835043,5024775472,6

The temporary general reduction of social security contributions applied to March–June 2020. The reduction meant that employers paid a social security contribution of 10.21% instead of 31.42% for up to 30 employees per company and up to a wage sum of SEK 25 000 per employee and month. The temporary reduction of social security contributions for young persons is for persons aged 19–23 and applies from 1 January 2020–31 March 2023. The reduction means that employers pay social security contribution of 19.73% instead of 31.42% on remuneration up to SEK 25 000 per month. In the period 1 June–31 August 2021 the reduction is enhanced to 10.21%  Compensation for sick pay costs refers to full compensation for the period April–July 2020; after that compensation is paid for sick pay costs that can be assumed to be higher than normal. All information is as on 30 June 2021.

Sources: Swedish Tax Agency, Swedish Agency for Economic and Regional Growth, the Swedish National Debt Office and own calculations.

A powerful green restart

The Government is implementing a powerful green restart to support the economic recovery and contribute to long-term sustainable development. The action being taken includes investments in energy efficiency in multi-dwelling buildings, expanded charging infrastructure for heavy vehicles, earlier railway maintenance, measures to protect valuable nature, a tax reduction for the installation of green technology and circular economy initiatives.

Increased transitioning opportunities

Many people have become unemployed or been hit in other ways by the rapid economic decline. The Government has therefore made temporary changes to unemployment insurance, strengthened health insurance and increased the opportunities of transitioning. The Knowledge Boost has been reinforced by providing more places in education and training that meet society’s needs and giving groups that have difficulty getting established in the labour market better possibilities of supplementing their knowledge and finding jobs.

Reinforced unemployment insurance benefit and the short-time work allowance have provided financial security during the crisis
The employment rate in Sweden decreased at the start of the pandemic, but is now among the highest in the EU, as it was before the crisis. Support measures, like the short-time work allowance system, have made it possible to save a great many jobs. Sweden’s compensation systems are linked to activity, which has contributed to keeping the labour force participation rate at a high level during the crisis. This has, in turn, contributed to unemployment increasing more in Sweden than in the rest of Europe. However, the share of long-term unemployed is at a lower level in Sweden than in other EU member states. To further strengthen financial security during the crisis, unemployment insurance benefit has been reinforced. Unemployment remains high, but is expected to decrease rapidly in the future since demand for labour is increasing. Some groups in the labour market, such as people born outside Europe and people with a low level of education, have been hit harder by the crisis, as is also seen in the composition of long-term unemployment.

Fiscal policy has played a greater role than in previous crises

The IMF’s most recent estimate of countries’ financial support measures suggests that Sweden’s measures are well in line with those of several comparable countries, chiefly with other Nordic countries. The Swedish economy coped much better than that of many other European countries in 2020 and, so far, its recovery has been faster. In the second quarter of 2021 the Swedish GDP was back at the same level as before the pandemic (see figure 1.3). In the other Nordic countries activity in the economy has also been maintained relatively well.

Tabellrubrik
ÅrSEUSThe euro areaFIDKNO
2019Q4100100100100100100
2020Q19999961009998
2020Q2919085939392
2020Q3989796989997
2020Q4989895989999
2021Q1999995989998
2021Q21001019710010199

Fiscal policy has played a greater role than in previous crises. Without an active fiscal policy and strong safety nets, companies and workers would have needed to bear more of the costs of the closures with the risk that this would result in extensive bankruptcies and unemployment. The support for short-term work has cushioned the fall in employment; in 2020 it covered almost 600 000 jobs, and take-up was also high in the first half of 2021.

The measures taken on account of the spread of COVID-19 have been based on policy agreements between the Swedish Social Democratic Party, the Centre Party, the Liberal Party and the Green Party.