Unemployment is expected to rise to nine percent this year alone, whereas GDP growth will turn negative, the government’s forecast has predicted.
A new government report presented by Finance Minister Magdalena Andersson predicts a bleak immediate future for Sweden.
According to the government, the coronavirus eruption has triggered a supply and demand shock, the effects of which are spreading between countries.
Both the global economy in general and the Swedish one in particular are expected to enter a recession with “sharp negative GDP growth in 2020”, the government warned.
Sweden’s GDP is expected to decrease by 4 percent in 2020, which, according to Andersson, is on par with the plunge it took during the financial crisis.
“The negative growth and widespread redundancies reported so far confirm the picture that the labour market will deteriorate significantly with employment falling and unemployment rising,” the government wrote.
According to its prognosis, unemployment in Sweden will rise to 9 percent in 2020, up from 6.8 in late 2019. This effectively quashed Prime Minister Stefan Löfven’s promise to deliver the EU’s lowest unemployment by 2020.
“We believe it will take several years for the economy to recover”, the finance minister said at the press conference.
Extensive fiscal measures and falling tax revenues are expected to lead to “major public deficits”. The public sector’s financial savings are expected to decline this year to minus 3.8 percent of GDP. However, according to the government, Sweden’s low debt ratio provides a better starting position compared to many other countries.
At the same time, there is great uncertainty about the course of events, according to Magdalena Andersson, since the pandemic is incomparable with an “ordinary” financial crisis.
So far, Sweden, which has chosen a different path compared with its Nordic peers and the rest of Europe, with no lockdowns and only voluntary restrictions, described as “the Swedish model”, has seen 4,435 COVID-19 cases, resulting in 180 deaths. While the number of infected people is comparable with its neighbours, Sweden has seen more deaths than the rest of the Scandinavian nations combined. Greater Stockholm is the most affected area of the country.
The coronavirus pandemic that broke out in the Chinese province of Hubei in December has now reached almost every country, infecting over 850,000. While over 42,000 have succumbed to the disease, some 178,000 have effectively recovered.