Sweden’s ‘Gentler’ Lockdown to Limit Economic Damage, SEB Says

Sweden’s “relatively gentle lockdown strategy” will limit the downturn in its economy compared to those in other Nordic countries, according to analysts writing in SEB’s outlookreport.

The region’s biggest economy will nevertheless be severely tested by the corona crisis with SEB expecting Swedish GDP to shrink by almost 7% in 2020, making it the largest drop in modern times.

In terms of monetary policy, the Riksbank will likely keep its repo rate unchanged at zero throughout this year and next, but SEB also predicts an expansion of the central bank’s bond-buying program by another 300 billion kronor ($30.6 billion).

Elsewhere, the report notes:

  • Sweden working day corrected GDP growth of -6.7% this year, compared with 0.9% in the previous report from February; sees a recovery of 4.9 % for 2021 (vs 1.6% )
  • A cut to CPIF forecast to 0.3% this year (previously 1.4%) and 1.3% (vs 1.6%) for 2021
  • Unemployment increasing to 11% this year (vs 7.3%) and 11% (vs 7.4%) the following year; says will peak at record-high of 14% in the autumn
  • Further stimulus equivalent to nearly 2% of GDP to be launched during the rest of 2020 and in 2021
  • Says budget deficit and drop in GDP will push up the debt ratio to about 50% of GDP by end of 2021
  • Sees EUR/SEK at 10.35 in December this year (previously 10.10) and at 10.00 in December of 2021 (10.00)

Read More: Goldman Economists Caution Against Copying Sweden Virus Strategy

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