Sweden (Still No Government) Cuts Its Economic Forecast

(Bloomberg) -- As Swedes muddle along without a government more than two months after elections, the economic outlook for what’s left of 2018 just got a bit bleaker.

The caretaker administration of Prime Minister Stefan Lofven published forecasts that predict higher unemployment and slower economic growth than previously signaled.

The GDP downgrade was widely expected by most Swedish economists. But it comes as the country grapples with its longest period on record without a government. Elections on Sept. 9 proved inconclusive and successive attempts by the leaders of both blocs have so far failed to lead to a viable coalition. A key member of the Riksbank board recently warned that Sweden’s political stalemate may start to hurt its economic prospects.

Acting Finance Minister Magdalena Andersson says:

  • “The longer this takes, of course it may also affect the economic development. But we have margins -- high growth, strong public finances and low public debt. But of course, the longer it takes, it may also affect the real economic development.”

Riksbanker Warns Swedish Political Turmoil Could Start to Hurt

The speaker of Sweden’s parliament started another round of talks on Thursday to try to figure out how to break the stalemate and give the country a functioning government. With Swedish politics in limbo, all parties can present a budget proposal before a Nov. 30 deadline.

For now, economists at SEB say that it looks like Sweden will have slightly less fiscal support next year than initially expected. Investors are mostly focused on what all this means for the Riksbank. Policy makers have said they’re ready to raise interest rates either next month or in February.

Per Jansson, a deputy governor at the bank, warned that a protracted political stalemate in Sweden can become a “problem” that might make “the world around us” start to worry.