Sweden Cuts Economic Forecast for Next Year as Virus Spreads

(Bloomberg) -- Sweden, which avoided a strict lockdown in its response to the pandemic, said an expected rebound next year will be weaker than initially predicted as Covid-19 deepens its grip.

Gross domestic product is is set to grow 3% next year, below the 4.1% level predicted earlier, Finance Minister Magdalena Andersson said on Wednesday. The 2020 recession will be milder than first feared, at 2.9%.

Sweden’s controversial policy to impose fewer restrictions during the pandemic helped the biggest Nordic economy avoid much of the damage inflicted elsewhere in Europe. But with case numbers spiking and health authorities warning of a bleak winter, the government has acknowledged that the economy now faces heightened uncertainty.

“The Swedish economy’s recovery during fall has been stronger than we and many other forecasters expected, and hence, the forecast for growth this year has been revised higher,” Andersson said.

“At the same time, the increased transmission as well as new restrictions are expected to dampen activity during this quarter and the beginning of next year,’ she said.

Prime Minister Stefan Lofven is trying to contain a much more serious resurgence of the virus than the top health authorities predicted would grip the country in a second wave as its hospitals are struggling with a shortage of staff and the capital has decided to shelve all non-essential health-care services.

”We have a much weaker development and no growth in the fourth quarter or the first quarter of next year,” Andersson said. “After that we expect that restrictions can be eased. There is a bright light in the tunnel, and that’s the vaccines.”

Sweden expects to get enough vaccine doses to immunize a fifth of the population in the first quarter, officials said earlier this month. The country has registered 791 confirmed cases per 100,000 inhabitants over the past 14 days, while death rates clearly exceed those in its Nordic neighbors.

The ministry upgraded its unemployment forecasts for this year and next, to 8.5% and 9% respectively. It also cut its outlook for general government budget deficits in 2020 and 2021 to 3.9% and 3.6%, respectively.

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