Country Report Sweden October 2017

Country Report Sweden October 2017

  • October 2017 •
  • Report ID: 360808 •
  • Format: PDF

Outlook for 2018-22



  • The Economist Intelligence Unit expects the governing coalition led by the centre-left Social Democratic Party (SAP) to last its full term, to September 2018.
  • The far-right Sweden Democrats (SD) hold the balance of power in parliament and have threatened to trigger a government crisis and an early election. However, most of the opposition parties want to avoid this.
  • The more centrist opposition parties reject collaboration with the SD, but there is a strong chance that they will reluctantly agree to support the party after the next election, producing a centre-right majority government.
  • Economic activity in 2017 has been strong, and we expect full-year real GDP growth of 3% (revised down from 3.2%). Thereafter we expect the pace of growth to ease, to 2.4% on average in 2018-22.
  • Private consumption and gross fixed capital formation will be the primary drivers of economic growth in 2017-22, supported by low borrowing rates.
  • Monetary policy will remain expansionary. In 2016 the Riksbank (the central bank) cut its policy rate to -0.5%, and in April 2017 it expanded its asset purchase programme to end-2017. We do not expect further policy loosening this year.
  • Unwinding energy price base effects pushed up inflation in early 2017. After inflation of 1% (national measure) in 2016, we estimate average inflation of 1.7% this year and forecast average annual inflation of 1.9% in 2018-22.


Review



  • Ulf Kristersson, the economics spokesperson for the centre-right Moderate Party and a former minister for social security, became the Moderates' leader on October 1st, following the resignation of Anna Kinberg Batra in August.
  • On October 9th the leaders of the main political parties participated in a televised debate that centred on security, the labour market and taxation.
  • In the heated debate, Mr Kristersson clashed with the prime minister, Stefan Lofven, while the leader of the Christian Democrats (CD), Ebba Busch Thor, demonstrated her party's aversion to the SD by refusing to shake the hand of its leader, Jimmie Akesson.
  • In September consumer price inflation was 2.1%, unchanged from August. The main core measure of inflation, known as CPIF (based on a fixed interest rate) is the target measure of the Riksbank and was also stable, at 2.3%.
  • The seasonally adjusted unemployment rate (national measure) fell to 6.6% in August, almost fully reversing an increase to 7.1% in July, from 6.5% in June.
  • In August seasonally and working-day-adjusted industrial production declined by a monthly 1.7%, but was still 8% higher year on year.


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