Sweden Cuts Economic Outlook and Forecasts Negative Rates

(Bloomberg) --

Sweden’s government has slashed its economic forecasts for this year and next as it acknowledges the fallout of a global slowdown on its export markets.

The Social-Democrat-led administration released a set of estimates that also show it’s expecting interest rates to go negative again next year. The forecast comes less than a month after the Swedish central bank made history by ending five years of subzero rates, arguing the economy was strong enough to handle the step.

The fallout of a global economic slowdown is “becoming increasingly clear” in Sweden, the government said on Thursday. It said the forecasts don’t include the effect of reforms it’s hoping to push through to support the economy. Sweden now sees GDP growing 1.1% this year, compared with an August forecast for 1.4%. It cut its 2021 growth estimate to 1.6% from 1.8%.

“In recent years we have built up a welfare reserve by paying off national debt, which makes it possible to address the slowdown without savings packages,” said Finance Minister Magdalena Andersson at a press conference at the government’s headquarters in Stockholm.

Andersson also pointed to the demographic challenges facing Sweden.

“The large group of people born in the 1940s is getting older and those born in the 1990s are of child-bearing age. This means that all future expenditures will have to be balanced against increased resources to welfare,” she said.

To contact the reporter on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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