IMF Public Information Notices: Dark cloud continues to hang over Sweden’s economy

Thursday, 28 June 2012
The economic outlook for the Swedish economy is still dark and the risks to the growth leans towards the downside. This was the view of the International Monetary Fund, IMF, in a report on Wednesday.

The main risks are, according to the IMF, a possible sharp recurrence of tensions in the euro area and / or a "lost decade" of growth there, and in connection with this potential further oil supply shocks and significant tensions in the international financial markets.

IMF forecasts that real GDP growth will fall from 4 percent in 2011 to 1 percent in 2012, before recovering to 2.3 percent in 2013, and thus follow on the whole development of (advanced) Europe and is somewhat more optimistic than the Swedish central bank (Riksbank's) forecasts.

IMF praises Sweden's continued strong macroeconomic performance, supported by appropriate policies and effective institutions. They also welcomed efforts to strengthen the framework for macro-prudential supervision and oversight of the financial sector through a tightening of capital adequacy and liquidity requirements, and urged the authorities to continue their cooperation with regional banking supervisors.

They also highlighted the importance of strengthening the Basel II regulatory framework, as well as bank resolution and crisis management arrangements.

“And though the level of private consumption has not fallen, its growth remains lackluster despite resilient employment and incomes into the early part of 2012—in part reflecting that unemployment remains elevated relative to the immediate pre-crisis period,” said the IMF.

However, the IMF points that declining wealth and a low confidence have led to further increases in household saving rates. At the same time, while both temporary and permanent employment increased in 2010, with permanent jobs numbers now significantly surpassing pre-crisis levels, job creation seems to have slowed. Read more about the IMF report here
By Scancomark.se Team

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