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Stronger recovery in Swedish economy than expected
The Swedish economy is showing a stronger recovery than expected during the autumn. The labour market situation has also developed more positively compared with previous assessments. The employment rate is expected to be somewhat higher this year and next year compared with the assessment in the Budget Bill for 2021, while unemployment is expected to be lower. However, in the future, activity is expected to be hampered as a consequence of an increased spread of the COVID-19 virus and restrictions. This is clear from the Ministry of Finance’s most recent economic forecast, presented today by Minister for Finance Magdalena Andersson.
Swedish GDP increased strongly in the third quarter, and seasonally adjusted GDP growth increased by 4.9 per cent compared with the second quarter. The increased spread of the virus in Sweden and several other European countries, with stricter restrictions as a result, means that activity is expected to be hampered at the end of 2020 and the beginning of 2021. Overall, GDP is expected to fall by 2.9 per cent this year and increase by 3.0 per cent next year. Resource utilisation is expected to be significantly lower than normal and the Swedish economy is expected to be in deep recession in both 2020 and 2021.
“The recovery in the autumn has been stronger than expected, with strong GDP growth in the third quarter. However, we are seeing an increased spread of the virus again, which is expected to negatively impact activity in some parts of the economy. The positive news regarding vaccines gives hope for 2021, both in respect of people’s health and the economic outlook. However, there is great uncertainty, and much depends on how the spread of the virus and vaccination progress in Sweden and around the world,” says Minister for Finance Magdalena Andersson.
Following the dramatic deterioration in the Swedish labour market in the spring, developments have been more positive in the autumn, even if the situation continues to be very serious. The employment rate has been revised upwards and unemployment is expected to be lower compared with the forecast presented in August. Around 30 000 fewer people are estimated to be unemployed and around 30 000 more people are estimated to be employed this year and next year compared with the previous assessment. Unemployment is estimated to be 8.5 per cent this year, and 9.0 per cent next year.
General government net lending is estimated to be -3.9 per cent of GDP in 2020. The strong recovery in the autumn has meant that tax revenues have been higher than expected. At the same time, additional pandemic-related measures have been presented since the Budget Bill for 2021. All in all, it appears that the deficit will continue to be large in 2021.
“We have introduced historically powerful packages of measures to support Swedish jobs and businesses through the crisis. Together with falling tax revenues, the large general government deficit produces an increased national debt. At the same time, we have had a strong starting position in comparison with many other countries, with the lowest national debt since 1977,” says Ms Andersson.
Press Secretary to the Minister for Finance Magdalena Andersson
Phone (switchboard) +46 8 405 10 00
Mobile +46 73 086 32 01
email to Johan Ekström
Head of the Macroeconomic Forecasting Division
Phone +46 8 405 96 21
email to Karine Raoufinia, via senior registry clerk
Head of the Division for Public Finances
Phone +46 8 405 47 18
email to Thomas Bergman, via senior registry clerk