Sweden Growth Prediction Exceeds Expectations

A surprisingly strong performance from the Swedish economy so far this year has led forecasters to update their prediction for GDP growth in 2017, which is now expected to be better than previously estimated.

Sweden’s National Institute of Economic Research has revised its prediction for GDP growth in 2017 to a more optimistic one of 3%, up from the previous forecast of 2.5%, The Local reported.

As growth was surprisingly strong in the second quarter it is thought that the upswing will be greater this year than initially expected, the NIER explained. Stronger than expected investment in businesses and housing is a driving factor.

“Domestic demand is driving it and robust growth in the rest of the world is providing support. In addition the upswing is reflected in strong public finances,” the NIER said in a statement.

“The upturn is reflected in the labor market and employment continued to grow quickly in the second quarter. But a significant lack of labor with the demanded competencies will hamper economic development going forward,” it warned.

That skills shortage does not mean that wages will increase significantly however according to the NIER, with average wage increases predicted to be below 3% next year.

And in contrast for the growth prediction for 2017, the GDP growth prediction for 2018 has been revised down by 0.2% to 2.2%.

Fresh figures released by Statistics Sweden last week show that Sweden’s GDP grew by 1.7% in the second quarter of 2017, meaning its year-on-year growth rate landed at 4%–comfortably beating growth of 2.8% that was expected from that period by forecasters.

Meanwhile, unemployment is falling among foreign-born people in Sweden, as well as the population on the whole.

Sweden’s national job agency Arbetsformedlingen predicted last week that 149,000 new jobs will be created in 2017 and 2018, with the majority of those going to foreign-born workers.

“Eight out of ten new jobs go to foreign-born people at the same time as the employment rate among foreigners increases by two percentage points. That is a happy message in a time when there are many new arrivals who have to enter the Swedish labor market,” said Arbetsformedlingen’s director-general, Mikael Sjoberg, in a statement as the agency presented its new prognosis.

However, those with high levels of education are still more likely to benefit from the increase in employment than those with lower levels of education, the agency noted in its report.