In the 1990s and the early Noughties, many Swedish companies transferred production to low-wage countries, but with increasing automation, wages are no longer a decisive factor and there has been a recent movement towards insourcing and reshoring.
Conny Fridlund, head of product development at Atlas Copco, says no low-wage country can compete with an automated high-wage country, if the volumes are there. “If you have two million pieces and invest 20 million kronor in automation with 10-year depreciation, it just adds 1 kronor on the product”.
Every figure of significance for Sweden’s economic and monetary policy was present in the Riksdag yesterday for the open hearing on Marvin Goodfriend and Mervyn King’s review of the Riksbank’s monetary policy.
Lord King’s message was clear, “House prices have increased by 15%. Growth is 4%. It is not the time to be complacent.” Referring to the situation in which the Swedish Financial Supervisory Authority (FSA) has been given responsibility for a debt ceiling, but cannot act, he said it was “bizarre”. The authority needs clarification from the government about what further measures it can carry out to counteract household debt.
Finance Minister Magdalena Andersson said the Ministry of Finance is examining the issue. Mervyn King’s view is that the government ought to make the decision and then commission the authority to achieve the target.
Kerstin Hessius, CEO for the Third AP fund, and former deputy governor of the Riksbank, has gone on the offensive against the central bank. “I consider the Swedish monetary policy that the Riksbank is conducting no longer to be credible,” she says, pointing out that we are living in a globalised economy and the Riksbank cannot bring up inflation in isolation.
“Minus interest rates have, most likely, a fairly large negative effect. A major disadvantage is that it contributes to assets in society being priced wrongly. Clearly property is one such area,” she says, and warns that when interest rates return to normal it could be a painful journey.
She believes the Riksbank ought to reconsider its interpretation of the target for price stability in Sweden immediately.
According to a survey of 79 business figures that DI has carried out, 53 believe the Riksbank is wrong to keep interest rates in negative territory.
According to those questioned the negative repo rate sends out crisis signals, which creates uncertainty. Staffan Hansén from pension giant SPP says, there is a clear risk of a financial bubble and that the economy becomes dependent on low interest rates. Magnus Greko, CEO for Opus Group, says, “The signal from negative interest is simply not in agreement with the picture of the development of the economy.”
Furthermore Robert Bergqvist, head economist at SEB, says the policy has become counterproductive. Instead of leading to increased investment it has led to greater caution.
Sweden’s new submarine A26, of which the state has ordered two from defence group Saab, has been harshly criticised. The criticism focuses on a portal, fiercely marketed by Saab, which can release divers and special forces into the water. Former commander and head of the three Swedish Näcken-class submarines, Nils Bruzelius, says that the portal cannot be used in the situations it is designed for.
However Mats Eolfsson, from the Swedish Defence Materiel Administration (FMV), which has paid almost SKr 8 billion for the submarines, has dismissed the criticism saying the portal is flexible and could also be used for new weapons.
The European Commission has lowered its growth forecast for the eurozone and the broader European Union. Gross domestic product is expected to land at 1.6% in 2016 and 1.8% next year, while growth in the region as a whole is expected to hit 1.8% this year and 1.9% in 2017.
Sweden will continue to fare well, the Commission said, upwardly revising its growth forecast for the Scandinavian country, from 3.2 to 3.4%. The budget deficit is expected to be 0.4% of GDP.
“Sweden is not in as deep a recession as the rest of Europe; unemployment is quite high but Sweden has the highest employment rate. This provides a good tax base and strong finances,” Swedbank chief economist Anna Breman has said.
New amortisation requirements, which will come into force on 1 June, as well as other measures designed to curb household debt, will affect households in Stockholm, Gothenburg and Malmö the most and lead to falling property prices in these areas, finds Swedbank.
The Swedish Financial Supervisory Authority (FSA) has calculated that an average household will pay between 1,000 and 1,500 kronor extra when the new amortisation requirements come into being. However, Swedbank believes there will be wide regional differences. In Stockholm, for example, the amount to be paid down on a house or apartment will rise by an average 2,800 kronor per month. The amount will be somewhat less in Gothenburg and Malmö and will be “negligible” in other areas, according to the bank.
IF Metall chair Anders Ferbe and Anders Weihe, the chief negotiator at the Association of Swedish Engineering Industries, are calling for a review, following the news that the Public Employment Service (Arbetsförmedlingen) has failed to offer training in shortage occupations. Weihe goes so far as to say that the public agency should be disbanded.