Stockholm, 18 August 2022
Russia’s illegal invasion of Ukraine has led to increased economic uncertainty. According to the Ministry of Finance’s latest economic forecast, an economic downturn is expected both in Sweden and globally. Minister for Finance Mikael Damberg presented the forecast during the Government’s deliberations at Harpsund today.
The Swedish economy is expected to grow by 2.3 per cent this year, which is slightly higher than projected in the Ministry of Finance’s previous forecast from June. GDP growth, however, is expected to be lower next year and fall to 0.4 per cent. The main reason for the low growth rate is the very weak growth in household consumption.
“We see that the Swedish economy is heading for an economic downturn, with lower growth, high inflation and elevated unemployment. We are facing a defining moment that will require prioritisation and responsible fiscal policy,” says Mr Damberg.
The labour market has been strong over the past year and the employment rate is high. The Swedish labour market will therefore be in a strong position when economic activity slows. However, as growth slows, employment growth is expected to weaken and unemployment to rise.
The forecast is uncertain. The supply and price movements of key commodities such as gas have become more uncertain as a result of Russia’s invasion of Ukraine. Uncertainty about how the supply situation in the commodity and energy markets will evolve makes it difficult to assess how long inflation will last in Sweden and the rest of the world.
Strong public finances
There will be a further strengthening of public finances in 2023–2025, largely as a result of the Government’s forecast principles, which means that only adopted and announced changes to tax regulations and central government expenditure are taken into account. The level of public debt will also continue to decline over the next few years and, in an international perspective, Sweden’s public debt will remain very low.
“Thanks to a responsible fiscal policy, Sweden has a low level of public debt. This is an important guarantor for strengthening Sweden’s economic credibility in these troubled economic times and enables us to tackle the challenges Sweden is facing. It gives Swedish households, businesses and the whole of Sweden strong buffers in this time of economic uncertainty,” says Mr Damberg.
Direction of economic policy
The scope for reform for next year is estimated at around SEK 30 billion but the future economic landscape is uncertain. The impact on public finances is difficult to assess in light of inflation and economic uncertainty.
“We are facing a defining moment. Swedish households are already under pressure from higher prices that are hitting their pockets. We need a responsible fiscal policy that does not push up inflation and worsen the economic situation. But we should also support those affected by price increases and those on extremely tight budgets by taking effective and proper measures,” says Mr Damberg.
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