COVID-19 epidemic: Sweden’s economy dives without lockdown
The Swedish economy has taken a hit despite having no coronovirus lockdown in the country.
Unlike most countries, Sweden never closed during the coronovirus epidemic, largely operating businesses, but the economy nevertheless appears to take a hard hit.
Under the controversial approach to the virus in the Scandinavian country, cafes, bars, restaurants and most businesses remained open, as did schools for under-16s, urging people to follow social distance and hygiene guidelines.
Whatever was expected, this policy may have softened the economic blow.
SEB Bank economist Ole Holmgren said, “As in most countries of the world, the Swedish economy will have a record decline in Q2.”
‘A long time’
“There was a possibility of a rebound in the latter part of the year, but we expect it to take a long time before the situation returns to normal,” he told AFP.
To be fair, the Swedish authorities insisted that their strategy was always aimed at public health, and especially never to save the economy.
This was to ensure that hospitals could keep pace with the outbreak and protect the elderly and at-risk groups.
Sweden has been successful in the former, but has since admitted failure, with more than three-quarters of virus deaths among nursing home residents and at-home carers.
Finance Minister Magdalena Anderson told reporters at the end of May, “When we have decided what measures have been taken to stop the virus from spreading, we do not have any economic considerations. We have taken up the issue with our (public health) ) Have followed the advice of experts. ” .
Nevertheless, officials acknowledged that keeping businesses open was also part of the broader public health idea, as high unemployment and a weak economy typically lead to poor public health.
Sweden, a country of 10.3 million, had reported 4,639 COVID-19 deaths as of Friday.
It gives one of the world’s highest virus death rates, with 459.3 deaths per million inhabitants – four times more than in neighboring Denmark and 10 times more than in Norway, which both imposed stricter imprisonment measures.
Sweden’s export-heavy economy was recovering earlier, with GDP actually increasing by 0.1% in the first quarter.
But now the country is expected to follow the same path across Europe, whose economy will continue to shrink throughout the year until 2020 and unemployment will increase.
GDP down, unemployment up
In April, the government projected GDP to grow by four percent in 2020, while in January its estimate would increase by 1.1%.
While the European Commission forecasts a Swedish contraction of 6.1% (compared to -6.5% for Germany and -7.7% for the eurozone), the outlook presented by the Swedish central bank is even more terrible – it is up to GDP is expected to fall by 10%.
Some economists see Swedish growth rebounding as early as the second half of 2020, but the Finance Minister warns that they may get better before they do.
Prior to the crisis, Sweden’s labor market was in good shape, with strong employment generation and a declining unemployment rate.
Now the government expects to have an unemployment rate of nine percent for 2020 and 2021 compared to 6.8% in 2019.
It sees an increase of 3.5% in 2021.
Export based economy
Sweden’s sharp recession is largely explained by its dependence on exports, which is about 50 percent of GDP.
“70% of Swedish exports go to the European Union. Shutdowns to Germany, Britain and so on are expected to cause Swedish exports to be quite a hit,” the government said.
In March, some of the country’s largest companies, such as automaker Volvo Cars and truck manufacturer Scania, halted production in Sweden.
This was not due to local restrictions, but because of supply chain problems in Europe and the rest of the world. Their activities have resumed.
According to a study conducted by four University of Copenhagen economists, between March 11 and April 5 consumed 24.8%.
“Sweden is paying the same price (as Denmark) for the coronovirus epidemic. The explanation is that when you are in a gallop crisis, consumers pull emergency brakes, whether the restaurant is closed or not.” Niels Johansen, one of four economists. , Told the Swedish daily Helsingborgs Dagblad.
In mid-March, the government announced measures of about $ 32 billion to help businesses.
Since then, more money has been allocated and new measures have been added, including a reduction in employers’ contributions.
Ole Holmgren promised, “Given the state of government finances, there is room for further expansionary fiscal policy.”