Statement by the IMF Staff Representative

This 2004 Article IV Consultation highlights that the downturn experienced by the Swedish economy in 2002–03 was relatively mild, with growth remaining well above the European Union average. Expansionary fiscal policy in 2002 underpinned private consumption. Private investment, however, remained weak and activity decelerated when the impact of public sector stimulus waned in the first half of 2003. Economic activity is expected to pick up steadily in 2004–05 as the global recovery gathers pace. Adjusted for calendar effects, output is expected to rise by about 2 percent in 2004.

Abstract

This 2004 Article IV Consultation highlights that the downturn experienced by the Swedish economy in 2002–03 was relatively mild, with growth remaining well above the European Union average. Expansionary fiscal policy in 2002 underpinned private consumption. Private investment, however, remained weak and activity decelerated when the impact of public sector stimulus waned in the first half of 2003. Economic activity is expected to pick up steadily in 2004–05 as the global recovery gathers pace. Adjusted for calendar effects, output is expected to rise by about 2 percent in 2004.

The following information on economic and financial developments, which has become available since the release of the staff report, does not change the thrust of the staff appraisal.

1. Economic activity continues to pick up speed, led by the strength of exports. Although rising industrial orders augur well for industrial production and exports, the recovery has yet to spur growth in employment. Indeed, the unemployment rate—a lagging indicator—rose from 5.3 percent in May 2004 to 5.8 percent in June.

2. Inflation slowed further in June. The consumer price index rose by 0.5 percent in the year to June, as compared with a 12-month rate of 0.7 percent in May. The measure of underlying inflation was 1 percent, some what below market expectations. The Riksbank left its policy rate unchanged at 2 percent on June 23.

3. The krona depreciated slightly against the euro in July. It reached a threemonth low of Skr 9.2 per euro at end-July, but remained strong against the U.S. dollar. In terms of its trade-weighted index, the krona depreciated by 1 percent during June–July.

Sweden: 2004 Article IV Consultation-Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Sweden
Author: International Monetary Fund