Will Sweden have higher growth as it had an easier lockdown?

Yıldız Akkaya, Carl-Johan Belfrage, Vesna Corbo och Paola Di Casola of Riksbank in this research note:

Swedish GDP closely follows that of our most important trading partners. In the crisis triggered by the coronavirus pandemic there are nevertheless a number of factors indicating that the Swedish economy could be less negatively affected in the short term than other countries:

    • The Swedish economy has not been closed down to the same extent as many others.
    • The sectors that have been hardest hit by social distancing comprise a relatively small percentage of GDP in Sweden.
    • The low national debt in Sweden provides relatively good opportunities to use fiscal policy stimulus to support companies and households that have been hit hard.

But there are also indications that the reverse could apply.

    • The Swedish economy is dependent on trade with other countries functioning, at the same time as the ongoing crisis exposes international trade to severe strain.
    • Swedish households have a high level of debt, which entails risks for both households and the financial sector.

In this Economic Commentary the authors discuss some of the reasons why the relationship between Sweden’s and other countries’ GDP development may differ from what we have observed historically. Their conclusion is that the economic consequences of the pandemic could be slightly smaller in Sweden than in many other countries. However, they say that it is too early to say anything about how different economies will develop in the longer run. We are still at an early stage of the economic crisis, and much is still unclear with regard to the spread of the virus. It is therefore extremely difficult to know what the conditions will be for developments in the coming years.

 

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