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The Swedish economy is expected to recover in 2010 after suffering a severe economic slump this year, the National Institute for Economic Research or NIER said Friday.
Unveiling its latest forecast, the think tank said the Swedish economy would expand 2.7% in 2010 after contracting 4.4% this year. Growth would then accelerate to 3.3% in 2011.
"Sweden´s GDP has gradually begun to increase," the think tank said. "The economy has passed its low point largely because of expansionary fiscal and monetary policies, including tax cuts and low interest rates." For the next few years, the Swedish economy is expected to continue strengthening, it added.
The unemployment rate is forecast to be at 8.5% in 2009, at 10.1% in 2010 and may rise to 10.4% in 2011. Growth in hourly earnings would ease to 2.3% in 2010 from 3.1% 2009 and to 2.2% in 2011.
In the general government sector, employment will increase in both 2010 and 2011, because of an expansionary fiscal policy, NIER said. But total employment will continue to fall in 2010, though the rate of decline will lessen substantially during the year. In 2011 employment will again be rising.
Inflation is expected to rise to 0.5% next year from negative 0.3% forecast to log this year, the think tank said. In 2011, it would climb to 1.7%. On the monetary policy, the NIER said the Riksbank would raise rate to 0.75% in 2010 from 0.25% this year and to 1.75% in 2011.
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