Central banks around the world are stumped as to why inflation is low and wage growth slow despite the fall in unemployment after the financial crisis. Federal Reserve chair Janet Yellen has even described the phenomenon as a “mystery”.
Sweden’s Riksbank, in particular, has failed to pay heed to one important explanation for the phenomenon, namely the outsourcing of high-skilled services to low-cost countries, claims Lena Hagman, chief economist at employer organisation Almega.
She believes Sweden’s central bank will be forced to delay the planned rise in interest rates and revise down its growth and wage forecasts, saying: “The Riksbank argues that the problem of finding staff will lead to an accelerated wage drift in the affected sectors, as we have been used to in previous economic booms. But that is no longer the case”.
The Association of Swedish Engineering Industries (Teknikföretagen) forecasts a 12% increase in manufacturing output in 2017, and a 5% increase in 2018. The high level of output is due to global demand, although the automotive industry is in a lull. In Sweden, however, the automotive industry is fuelling growth in the engineering industries.
The Swedish Financial Supervisory Authority, or FSA, said on Monday that all new mortgage holders who borrow more than 4.5 times their gross income must amortise 1 percentage point more of their mortgage per year than is the case at present. It will now be up to the Swedish government to decide what to do.
Opinion is divided, however. Housing Minister Peter Eriksson has openly expressed his doubts but Financial Markets Minister Per Bolund, who is the responsible minister, has warned of the consequences if the proposal is stopped.
The government intends to hold talks with the opposition, but Per Bolund is keen to stress that it will be up to the government rather than parliament to make a decision.
The opposition parties have in principle already said No to the proposal. Elisabeth Svantesson, the Moderate Party spokesperson on economic policy, argues that such a requirement would stop young people from buying a home and could fuel a downturn.
Housing Minister Peter Eriksson is doubtful about the new amortisation requirement and believes other alternatives ought to be considered.
On Monday the Financial Supervisory Authority (FSA) is expected to make a decision about whether to introduce new tougher amortisation requirements. The issue is a difficult decision for the government as giving the go-ahead could entail risks, but stopping the proposal would undermine the FSA.
On Wednesday Financial Markets Minister Per Bolund (Green) criticised the opposition, calling its stance against the proposal “irresponsible”. However, party colleague Peter Eriksson expressed his uncertainty. “I think the amortisation requirement that was brought in recently has had mainly a positive effect. In the situation we have now it is more uncertain. I think that other possible measures ought to be considered,” he says. His main concern is that it would slow down housing construction.
While property brokers are warning prices in Stockholm have already fallen by 15%, the issue of new tougher mortgage requirements is to be decided. On Monday the board of the Financial Supervisory Authority (FSA) is to make a decision, although director general Erik Thedéen has already said that he is prepared to go ahead with the proposal.
He has not only defended the proposal but accused critics of representing special interests and exploiting the uncertain market situation to postpone it.
The opposition has already stood against the proposal, so the government is alone. However, although formal approval from the Riksdag is not needed, it is not a good option for the government to make a decision that changes the rules of play on a rocky property market ten months before an election.
Annika Winsth, chief economist at Nordea, says that if the government opposes the new amortisation requirements, the judgement of the FSA is being put in question and Erik Thedéen ought to seriously consider whether he should remain in post.
The Paradise Papers leak has stirred up the Swedish business world. Chair of the Confederation of Swedish Enterprise Leif Östling is one of those who placed funds in the tax havens of Malta and Luxembourg, and has defended his actions. He says he has paid SEK 84 million in income tax and SEK 23 million in capital gains tax in Sweden, plus SEK 70 million in Germany and claims he is following rules with his funds in Malta and Luxembourg.
Now there are calls from within the business sector for Östling to resign. One source from within the confederation says there is a risk that businesses will leave the organisation. Maria Mattsson Mähl, CEO of Alpha CE and recently nominated to the confederation’s board believes Östling’s comments damage the organisation. “Most members are working hard to pay taxes and make ends meet,” she says.
However among one of the organisation’s heavyweight representatives, support is intact. “He is speaking as a private person, so our confidence in Leif is unchanged,” says Klas Wåhlberg, CEO for the Association of Swedish Engineering Industries.
The board of the airline SAS gained authorisation to implement a new issue of a maximum of 66 million ordinary shares during an extraordinary shareholders’ meeting on Friday. This corresponds to almost 20% of the number of common shares outstanding. It remains unclear whether the board is going to use the mandate, and if so, when.
On Friday the airline’s shares climbed after SAS presented new forecasts for the 2017/2018 financial year. SAS expects profits before tax and one-off posts to be between SEK 1.5 and 2 billion. This would constitute steady progress from the recent financial year.
The forecast indicates the company is in a significantly stronger position than several years ago, says Jacob Pederson, aviation analyst at Sydbank.
Sweden will take no legal action against Volkswagen over the diesel emissions scandal as prosecutors have no suspicion of wrongdoing against any individual in Sweden.
Following the decision, the Swedish Automobile Association (Motormännens Riksförbund) called on other Swedish authorities to take action.
More than 220,000 cars from Volkswagen, Skoda, Audi and Seat were recalled in Sweden after news of the fixing of diesel emission tests emerged in September 2015.
Exceptionally expansionary monetary policy and the refugee influx are fuelling the Swedish economy but concealing weak underlying growth potential, according to Mats Kinnwall, chief economist at the Swedish Association of Industrial Employers (Industriarbetsgivarna).
Kinnwall, who is also chief economist at the Swedish Forest Industries Federation (Skogsindustrierna), says low interest rates have fuelled investment into property but other forms of investment are necessary in order to raise growth potential.
“We need a new internet, we need a regime shift,” he adds, noting that global productivity growth is weak
Nordic operator Telia Company has divested its entire holding in Russia’s Megafon to Gazprombank for around SEK 8.6 billion. The transaction is in line with the company’s strategy to focus on the Nordics and the Baltics. The intention is to use the funds to make acquisitions on the operator’s home markets.