Transition to bioeconomy

 

Sweden must make the shift from an oil-based economy to a bio-based one, according to Sven–Erik Bucht, the minister for rural affairs. Pointing out that forests cover 70% of Sweden’s land area, Bucht says the country can make the transition from fossil fuels to sustainable energy, if it “does the right things”.

“Everything that is made from oil can be made from wood. In Sweden, our forest growth is equal in energy content to all the oil extracted in Norway. This will alter Sweden’s trade balance dramatically when we are able to become less dependent on oil,” Bucht tells DI.

The minister believes it is feasible that Sweden could be energy self-sufficient within 10-15 years.

Executives want new elections

A fresh Skop survey has revealed that just 30% of Swedish business leaders believe the centre-left government is doing a good job, and that 63% believe it would be beneficial for Sweden if a general election were to be held in the autumn.

Professor Ulf Bjereld of Gothenburg University says the poll reveals the frustration the business sector feels about the parliamentary situation, but he does not believe a new election would resolve the problem; there is much to suggest the Sweden Democrats would hold the balance of power once again.

Growing interest in electric cars

New car registrations were up 11% in the first half of 2015, while new registrations of electric or plug-in hybrids rose by 56%, according to Bil Sweden, the association that represents manufacturers and importers of cars, trucks and buses.

Above all, it is car buyers in Stockholm, Gothenburg and Malmö who are showing a growing interest in cars with carbon emissions of less than 50g/km.

Nevertheless, electric and plug-in hybrids still represent a small part of the total market, accounting for just 2% of car sales in Sweden.

Acclaimed industry creates few jobs

With employment falling in the industrial sector, many happily point to the fast-growing internet sector as the saviour of jobs. In reality, however, the fast-growing sector is not the jobs engine that many claim it to be.

A DI survey shows that the aggregate market value of seven Swedish internet successes – Klarna, iZettle, Soundcloud, Truecaller, Spotify, Mojang and King – is greater than that of stock market giant Sandvik – but they only employ one-tenth as many.

The IT industry’s contribution to GDP is 5%, barely a third of the manufacturing industry, which with its contribution of 16% is still the main engine of the Swedish economy.

Riksbank takes market by surprise

Citing growing economic uncertainty, worries about Greece and the strengthening of the krona, Sweden’s central bank, the Riksbank, has announced a further cut in the benchmark repo rate, down to minus 0.35% from 0.25%. The decision was not unanimous, however, with deputy governor Henry Ohlsson, arguing that rates should have been held and that the extension on the purchases of government bonds would have sufficed.

The central bank’s announcement was unexpected, says Anna Felländer, Swedbank’s chief economist, who is critical of the move. She says it will reinforce the imbalances in the Swedish economy.

Meanwhile, Dagens Industri journalist Henrik Mitelman says it is the inflation target that should be lowered, not the repo rate, and that “crisis interest rates” provide a breeding ground for new bubbles and new crises.

Liberals stop pension funds’ reform

After the Social Democratic conference in May this year, Prime Minister Stefan Löfven said he was open to the idea of using Sweden’s national AP pension funds to fund infrastructure projects such as the North Bothnia railway line.

While the North Bothnia line may well be a stated preference project, it is not one that will generate the necessary return for the pension funds. The stated aim of the funds is in fact to generate the best possible return over time for Sweden’s pensioner, not to realise political projects, write Liberal leader Jan Björklund and Mats Persson, Liberal member of the Riksdag’s pensions’ group.

This is why the Liberal Party will use their veto to stop a recent proposal to set up a new authority to manage the pension funds, which together have assets of more than SKr 1,000 billion.

Sweden may have to borrow more

In a new forecast for the Swedish economy, GDP will grow by 2.6% this year, and by 2.7% in 2016. However export-led growth has stagnated and productivity is something of a disappointment. Additionally, tax revenue is less than previously forecast. As a result, the government is revising down its forecast over public savings.

To date Finance Minister Magdalena Andersson has said that the government’s reforms will be financed “krona for krona”. However, uncertainty in the euro area could force Sweden to increase its borrowing. “But we are not there yet, since reactions have been muted despite the Greek drama,” said Andersson on Tuesday