The board of the International Monetary Fund, IMF, has stated that Sweden’s economy continues to develop well but the government ought to deal with growing household debt. It predicts Sweden’s GDP to increase by 3.4% this year and 2.4% next year. The budget deficit is expected to be small this year and next year despite migration costs and investments in training and the labour market.
“Despite beneficial conditions on the labour market it still takes too long to get new arrivals into work, and unemployment is high among workers born abroad with little education,” writes the IMF. It also suggests reforms are needed to tackle the rise in house prices.
The National Institute of Economic Research, NIER, (Konjunkturinstitutet) forecasts that the Swedish economy will continue to strengthen and that GDP will increase by 3.6% this year, followed by 2.1% in 2017 and 1.9% in 2018. The unemployment rate will fall to 6.3% in 2017 before increasing again, as more refugees who have been granted residency are included in the statistics.
NIER’s Director General, Mats Dillén, says that educational measures and subsidised forms of employment will be needed to bring down the unemployment rate in this group. The social partners should also look at wage structure to ensure that it does not become to expensive to hire people with a low level of education and little experience of the Swedish labour market, he comments.
The boom in the economy and the deviation from the surplus target for government net lending indicate that fiscal policy should be tightened already in 2017. Mats Dillén point outs, however, that the surplus target is under review and the growing challenge of integration needs to be taken into account, saying; “The situation we have with immigrants underlines the risks of tightening [policy, ed.] excessively so that the economic boom comes to an end too soon”.