NIER: Sweden’s economic boom is over

NIER: Sweden’s economic boom is over

Sweden’s strong economic boom has reached its end, according to a report published last week from the National Institute of Economic Research (Konjunkturinstitutet, NIER). The government agency sees “clear indications” that the slowdown will continue for the rest of the year. The investment cycle in Sweden has also peaked. Housing investment is continuing to fall, and investment as a whole is not expected to have made any contribution at all to demand growth in Q3. Mildly expansionary fiscal policy will help prop up demand growth next year to some extent, but unemployment will continue to rise.

The government’s 2020 budget bill means that fiscal policy will be slightly expansionary. But despite new spending, government consumption will continue to increase relatively slowly next year. Inflation will remain well below 2%. Hence, the Riksbank is assumed to hold the repo rate at -0.25% until early 2022.

International trade disputes and uncertainty around Brexit are weighing on the global economy, which is affecting Swedish exports. The global economic slowdown and weak growth in world trade have led to a rapid downturn in new orders for Swedish manufacturers. Export market growth, defined as growth in imports in the countries to which Sweden exports, will fall this year to just below 3%. After a temporary surge in the third quarter, export growth is set to slow again.

The full report (in Swedish) is available here and a summary in English can be downloaded here.