Following a challenging period for the global economy, trends indicate increased stability. Inflation continues to be slightly high globally, but the austere monetary policy of the central banks has led to a dampening of global demand.
The inflation rate is slowly decreasing. GDP is decreasing as a result of higher interest rates, higher inflation and a decreasing export market. Therefore the Swedish economy is in a recession that is expected to persist in 2024. Household consumption continues to be one of the key determinants of the expected depth and duration of the recession. With lower inflation and a more positive interest rate outlook, the downside risks continue to decrease.
The recession has started to affect the labor market, where unemployment rate has increased. Forecasts from The National Institute of Economic Research´s and Statistics Sweden indicates that the unemployment is expected to increase as a result of the macroeconomic situation.
Unemployment has tended to lag behind economic activity as companies are probably holding off on layoffs and redundancies. However, it is too early to say how increased unemployment will affect the economic upturn. Households are suffering from falling real incomes and rising interest rates. Riksbanken (Sweden’s central bank) have since April 2022 increased its policy rate from 0% to 4% in September 2023.
In November 2023 and February 2024 Riksbanken decided to hold the policy rate unchanged at 4%. The market indicates that the policy rate may be lowered earlier than forecasted in the autumn of 2023. Both European Central Bank (ECB) and The Federal Reserve (FED) also decided to hold its policy rate unchanged.
Comments are closed.