Country Report Sweden

Summary

The four centre-right governing parties will struggle to regain the level of popular support that enabled them to win the 2006 election, but the stability of the government is not likely to be threatened.
Despite having lost popularity, the government will continue to work towards tax and welfare reforms. The public finances will remain in surplus.
The direct impact of the recent bout of global financial market instability on the Swedish economy will be modest, but a general tightening of lending criteria and weaker external demand will nevertheless be felt.
The Economist Intelligence Unit forecasts that GDP growth will slow from 2.8% in 2007 to 1.9% in 2008, increasing to 2.1% in 2009.
Given its sharp rise in recent months, we forecast that inflation according to the EU harmonised measure will rise to average 2.7% in 2008, but easing international commodity prices should enable it to fall to 2.2% in 2009.

The healthcare workers' strike for pay increases ended after six weeks on May 28th, following agreement on a new contract between employers' organisations and the healthcare workers' union.
A government inquiry into the residential rental market suggests significant changes, notably that supply and demand should play a greater role in determining rents. The proposal is to be reviewed by parliament.
New immigration rules, aimed at easing labour shortages in some sectors by making it easier for non-EU citizens to find work in Sweden, will come into effect on December 15th 2008.
In May the parliament voted in favour of the government's plan to end the retail monopoly of prescription and non-prescription drugs by opening the sector up to competition; these should come into effect on January 1st 2009.
Economic activity picked up slightly in the first quarter, with an average increase of 2.7%, up from 2.2% in the fourth quarter of 2007. However growth in new orders has slowed, reflecting slower demand from the external sector.
Employment levels continued to rise in April, up by 2.1% year on year. Unemployment (EU harmonised) stood at 6% in April, compared with 6.5% a year earlier.
Boosted by sharp rises in energy and food prices, headline consumer price inflation accelerated from 3.1% in the fourth quarter of 2007 to 3.2% in the first quarter, and increased again to 3.4% in April.