In spite of financial policy measures and significant lowering of interest rates, we still have not seen the end of the US recession. The adjustment of the housing market is far from over and further decline in house prices of 10-15 percent are predicted. This will reduce consumption even more. Continued credit problems and high oil prices will sustain recession and prevent interest rates and taxes to stimulate the American economy. Predicted GDP growth this year is 1.0 percent and it will drop to 0.7 percent next year. The US economy will probably not recover until the second half of 2009.
As a result of an increase in trade with Asia and Eastern Europe as well as greater household savings, the economic decline in Western Europe will not be as strong as in the US. However, in the Euro zone, GDP growth will weaken from 2.5 percent last year to 1.5 percent this year and roughly 1 percent next year. Sweden previously resisted the international economic decline decently, but it will be affected by the gloomy development in the world economy in the near future.
- GDP growth will gradually weaken from 2.1 percent this year to 1.3 percent next year. Exports as well as domestic demand will slow down. During the next few years, unemployment will gradually increase, says Robert Bergqvist.
The inflationary pressure rose primarily because of increased prices in energy and provisions and it is expected to remain high for the rest of the year to be followed by a gradual slow down. By year end, a lowering of interest rates may occur, says SEB. Next fall, the bank projects a lowering of the repo rate from today’s level at 4.25 percent to 3.25 percent.
To stimulate the Swedish economy, Robert Bergqvist believes that the government will introduce fiscal stimulus measures in the fall budget.
- As the 2010 parliamentary election approaches, the government will conduct an expansive fiscal policy and next year we estimate stimulus measures of SEK 30 billion, corresponding to 1 percent of GDP.
High growth economies in Asia will face a slower economic expansion, with rigid export prospects and less inflow of investment capital as a result of tighter credit conditions. The fundamentals look brighter for economies in the OECD area. This is a result of larger exposure of Asian banks towards its domestic markets.
Emelie Ring, Editor
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