The strong exports due to growth among the largest trading partners in Sweden and a weaker krona, together with stable domestic demand, will continue to support the Swedish expansion. This is why the OECD, the Economic Partnership for Industrial Areas, writes in the autumn forecast, Economic Outlook, which was presented on Wednesday.
Demand from large trading partners will continue to support companies' exports and investment, but to a lesser extent, as global growth prospects have weakened. Increased protectionism will also weaken export prospects and will be a major drawback for Sweden.
Residential investment will continue to decline and follow previous declines. Macro-prudential measures have probably contributed to a welcome correction of around 6% for house prices in the last 2017 and then to stabilization in 2018. However, structural weaknesses, and in particular the favorable taxation of real estate and loans, the lack of competition in the construction sector continues to create imbalances real estate market, writes the OECD.
The increase in employment is slowing down due to the shortage of workforce in many professions. At the same time, unemployment will collapse as people out of the labor market are a large part of the unemployed.
The increase in consumption decreased as a result of the slowdown in wage increases, reflecting the focus on competitiveness in wage negotiations.
Monetary and fiscal policies are still widespread. Inflation is around the target, partly due to transient factors. The Riksbank noted that it would start raising interest rates around the end of the year, which would be appropriate to offset the risks posed by inflation pushing below the target and that capital is misplaced.
The closed political situation can lead to tighter fiscal policy as the new government will have enough time to introduce new budget initiatives for 2019.