The Embassy of Switzerland in Sweden, in consultation with Ambassador Voeffray-Peyro, has recently released the economic report of Sweden for 2020/2021.
Summary:
In the wake of the Covid-19 crisis, the Swedish economy has been hit hard by historical standards but the fallout has been less severe than in other European countries. GDP fell by 2.8% in 2020. Current estimates predict that the Swedish economy will recover to pre-pandemic levels during the first half of 2021 and then bounce back strongly in the second half of the year, with GDP growth forecast at 3.3% in 2021 and at 2.9% in 2022. The level of public debt remains very low in Sweden in comparison with Europe and the rest of the world: 38.5% in 2020 (35.1% in 2019) – according to IMF figures.
To mitigate the impact of the pandemic, the Swedish government released a large economic support package. So far, the crisis-related budget and liquidity measures, guarantees and capital injections for 2020 and 2021 combined amount to about 28% of GDP.
While the economic fallout of the pandemic is comparable among the Nordic countries (Sweden, Denmark, Norway and Finland), Covid-19 infection and mortality rates have been much higher in Sweden than in the neighboring countries who all imposed rather strict and long shutdowns. It remains unclear to which extent Sweden’s light-hand approach to the pandemic has really benefitted the economy directly.
The current government is well aware of the need to address Sweden’s long-term structural challenges, especially in the dysfunctional labor and housing markets. Unemployment is at 8.3% and still growing (8.7% est. for 2021), and youth unemployment at 24% (one of the highest rates in the EU). However, other political priorities during the pandemic have prevented most reform proposals from moving ahead.
The Riksbank projects that the policy (repo) rate will likely remain at the same level over the medium term (following its increase to zero effective January 2020). While inflation was at 0.4% last year, its medium-term projection is slightly below the 2% target.
Stockholm Region is ranked the most competitive and second most innovative region in the EU and hosts 53% of all (global and Nordic) and 40% of all global headquarters in the Nordic Countries. The start-up ecosystem is considered one of the top three worldwide, and Stockholm has the second highest number of unicorns per capita in the world.
Swedish exports contracted by 6% in 2020, imports by 8.6% (goods). Most exports (57%) went to other EU countries, and most imports (72%) came from there. In addition, inter-Nordic trade (Denmark, Finland, Norway and Iceland) was significant: it stands for 25% of exports and 21% of imports. Service trade weakened somewhat more: exports –13.5%, imports -10.8%.
Sweden’s trade in goods with Switzerland decreased with 6.4% in 2020, to CHF 3.1 billion; exports decreased with 3.6% to CHF 1.63 billion whereas imports decreased with 9.4% to CHF 1.45 billion. It is worth noticing that the value of Swedish export of services to Switzerland is three times the value of the export of goods, whereas the Swiss export of services to Sweden is close to the value of goods exported. The Swiss direct investment stock in Sweden amounted to CHF 7.9 billion in 2019, the Swedish direct investment stock in Switzerland to CHF 10.2 billion.
