What will happen to Sweden
Here is the opinion of the Swedish macroeconomics analyst Johan Carlstrom (with background on Bloomberg and Cnbc) Let’s see what happens to the economy of Sweden, an EU country that has distinguished itself from the others for not having implemented particular restrictions on personal and corporate freedom during the pandemic. Many lights but, according to Swedish macroeconomics analyst Johan Carlstrom (with background on Bloomberg and Cnbc) it is likely that the biggest problem in the Swedish economy has gotten even bigger.
[Taken from the Svenska Dagbladet newspaper of April 16]
The Swedish economy performed better than many other countries during the Covid crisis. But not all is gold and green forests: despite massive efforts to save jobs in Sweden, unemployment has increased dramatically.
The covid crisis has left deep scars on the Swedish economy, which last year experienced a decline of nearly 3%, the second largest setback in just one year since World War II. But at the same time we have a lot to be happy about.
First, Sweden has done better than many economists initially feared. In the initial phase of the crisis, the Riksbank presented two scenarios. At best, the economy should have shrunk by nearly 7% in 2020 and at worst by nearly 10%, which is almost four times more than it ended.
The Swedish economy also experienced a significant decrease compared to most other comparable countries. In Germany and the UK, the economy shrank almost twice and five times that of Sweden. In the euro area, production fell by almost 7%.
The US economy also fared slightly worse than the Swedish economy, despite the much broader support package the country could count on.
The fact that Sweden has done better than the others is due to a number of things. For example, our company is more connected and digitized. It made it easier to work from home. Furthermore, we have a large manufacturing industry. That sector fared much better during the crisis than, for example, the tourism industry.
The result is that the Swedish economy is likely to recover with a bang this year and next. The government’s forecast is that Sweden will produce as many goods and services as we did before the crisis by the end of this year, after the recovery picks up speed in the fall and next winter.
This is good for the state’s finances, which are still nearly the best in Europe, despite the fact that the covid support received by the government after the spring budget amounts to just over SEK 400 billion. According to the government, central government debt will increase from 35 percent to around 40 percent of GDP. And a lot, but we must remember that the average debt in the EU is double. The support packages also gave results.
The International Monetary Fund (IMF) predicts that the damage to the world economy would have been three times greater without the various state rescue operations.
Sweden also has something else to rejoice about in the post-pandemic. The number of Swedish bankruptcies was significantly lower than feared last year, even slightly lower than the previous year.
But not everything is gold and green forests. When Finance Minister Magdalena Andersson presented the government’s spring budget on Thursday, she said there are three issues that permeate government policy: work, work and work.
But despite massive efforts to save Swedish jobs, unemployment rose dramatically in Sweden during the crisis. The percentage of the adult population that works is certainly the second highest in the EU. At the same time, unemployment has risen from just over 6 percent to nearly 9 percent over the past two years. The percentage of Swedes lacking a job is now equal to when unemployment peaked after the 2010 crisis.
The worst situation continues to be for the country’s youth (15-24 years), foreign-born Swedes. Europe and people without upper secondary education. Of the latter two, more than one in four does not have a job.
Fortunately, unemployment is likely to gradually decline after the restrictions are lifted. But the finance minister also warned the other day that unemployment among vulnerable groups will continue to be high.
At the same time, earlier this week, the Swedish public employment service warned that long-term unemployment will rise. Since the start of the pandemic, the number of people who have been out of work for more than a year has increased by nearly 20%.
Nearly half of all unemployed are long-term and the number is likely to rise to over 200,000 by the end of the year, according to the Swedish public employment service. These are, for example, people who have previously worked in commerce and administration whose work will not return as the economy becomes more and more digitized.
The government came to power almost seven years ago with the ambition of reducing unemployment to the lowest level in the EU by 2020. Since then, almost the opposite has happened. Earlier this year, Sweden had the fifth highest unemployment rate in the EU.
