Sweden's Recession Hits Bottom, Recovery Would Be Weak, Central Banker Says

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Sweden's deep recession has hit bottom, but the recovery would be weak, Riksbank's First Deputy Governor Svante Öberg said Tuesday.

He noted that recent economic indicators suggest a slightly stronger GDP growth than the Riksbank's forecast. However, the labor market is continuing to weaken and inflation is low. Given this background, the aim of the monetary policy should be at dampening the economic downturn, Öberg said.

The Swedish central bank forecast GDP to fall by more than 5% this year. "Our forecast is that GDP will not reach the same levels as prior to the start of the economic downturn in the second quarter of 2008 until 2012," Öberg said.

The policymaker said the central bank expects employment to fall by around 300,000 persons from the peak in 2008 to a trough in 2011 and that unemployment will continue to rise to around 11%.

Moreover, he said Sweden's public finances will deteriorate substantially this year and next year as a result of expansionary fiscal policy combined with a decline in public income and an increase in expenditure related to unemployment.

The central bank forecast the public sector financial balance will fall to a deficit of 4% of GDP in 2010 from a surplus of 4% GDP in 2007. However, Öberg said a deficit of 4% of GDP in public finances is much better other countries, like the U.K.

Sweden's deep recession has hit bottom, but the recovery would be weak, Riksbank's First Deputy Governor Svante Öberg said Tuesday. (Market News Provided by RTTNews)