World News

Swedish economy seen shrinking 4% in 2020 as pandemic hits

STOCKHOLM (Reuters) – Sweden’s economy is seen shrinking 4% this year the coronavirus outbreak hits supply and demand, a plunge rivaling that experienced during the global financial crisis more than a decade ago, Finance Minister Magdalena Andersson said on Tuesday.

The government has introduced a raft of measures, including subsidies for shorter working hours, tax rebates, loan guarantees and easier rules for claiming benefits, to soften the blow from the virus outbreak. Still, Andersson warned there were tough times ahead.

“We see growth falling and unemployment rising in a way we have not seen since the financial crisis,” she told reporters.

“This economic crisis is going to affect us all.”

The downturn this year is expected to be nearly as deep as during the global financial crisis in 2009 when Sweden’s economy shrank 4.2%, the biggest decline in more than 50 years.

Andersson, however, held out hope for a quicker rebound, forecasting growth of 3.5% percent in 2021. “We see a recovery in the economy in the second half of this year,” she said, adding that developments were very uncertain.

Businesses from restaurants to manufacturers like truck-maker Volvo <VOLVb.ST> have shut down and temporarily sent staff home as a result of the effects of the coronavirus, and many are expected to be laid off permanently.

A record 36,800 people were handed their notice in March, more than 10 times the number from the same month last year.

The government has offered loans and guarantees and expects to increase expenditure by around 84 billion Swedish crowns ($8.35 billion) this year.

At the same time, the central bank has poured money into the financial system, offering 500 billion Swedish crowns in loans to companies via banks and boosting its purchases of securities by 300 billion crowns.

Banking group Swedbank said recently it expected the economy to contract 4% this year. SEB’s forecast was for a 2.7% contraction.

(Reporting by Simon Johnson, additional reporting by Johan Ahlander, Johannes Hellstrom; editing by Niklas Pollard)