Fall in global markets a threat to Sweden’s GDP

Oxford Economics has said that a stock market correction could affect global growth; a 10% fall in global markets could have the potential to pull down growth and consumption in developed economies by as much as 0.3%.

The actual impact on consumption would vary from country to country, depending on the circumstances. However, economies with higher market capitalisations would be worst affected by the correction, argued the think tank, noting that Switzerland has an unusually high market capitalisation in relation to GDP. The same is true of Singapore, the United States and Sweden.

Andersson: the economy is strong

Social Democratic Finance Minister Magdalena Andersson’s Friday began well as Statistics Sweden released its national figures for the second quarter. GDP rose by 1.7% on the previous quarter and by 4% compared to Q2 2016.

“The Swedish economy is clearly extremely strong… It stands out clearly if you make international comparisons,” said Magdalena Andersson.

The figures exceeded expectations and Andersson pointed out several contributing factors, including household consumption increasing by 1.1%.

Minister hints at reforms

GDP in Sweden grew by 1.0% in the fourth quarter of 2016, compared with the preceding quarter, and 2.3% compared to the same quarter in 2015, according to Statistics Sweden.

Growth in exports of goods and services accounted for much of the increase while imports fell slightly. Increased household consumption, public consumption and investments also contributed.

However the increase in GDP per inhabitant was lower: 0.7% from Q4 2015 to Q4 2016, compared with a total increase of 2.3%. “This shows that the rise in GDP is not only a result of the growth in population, contrary to what many people believe,” says Finance Minister Magdalena Andersson. She is satisfied with GDP growth of 3.3% for 2016, above most EU countries.

Andersson highlighted that there is a surplus of SKr 40 billion in the public finances, saying, “This is mainly the result of the government’s work.” She also hinted that if the next GDP forecast is higher then this could create scope for more reforms in the budget.

Increased risks to economy

Finance Minister Magdalena Andersson (S) has revised down the government’s GDP growth forecast to 3.5 per cent, from 3.8 per cent, in 2016, but has revised the forecast up to 2.3 per cent, from 2.2 per cent, in 2017. The Swedish economy is healthy with improved public finances and falling unemployment, and the government can boost spending by SKr 24 billion in the autumn budget.

Erik Penser’s chief economist Sven-Arne Svensson presented the bank’s economic outlook on Wednesday, forecasting GDP growth of 3.2 per cent in 2016 and 2.0 per cent in 2017.

Sweden is expected to continue to outperform most other countries in terms of the current account surplus, public debt, the savings ratio and the labour market. However, there are increased risks to the economy, stressed Svensson.