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IMF Country Report No. 13/276
SWEDEN
STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION
September 2013
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2013 Article IV consultation with Sweden, the following documents have been released and are included in this package:
Staff Report for the 2013 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on May 31, 2013, with the officials of Sweden on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on July 26, 2013. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
Informational Annex prepared by the IMF.
Press Release summarizing the views of the Executive Board as expressed during its August 30, 2013 discussion of the staff report that concluded the Article IV consultation.
Statement by the Executive Director for Sweden.
The document listed below has been or will be separately released.
Selected Issues Paper
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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Front Matter Page
SWEDEN
STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION
July 26, 2013
Key Issues
After leading much of Europe in the recovery from the crisis, Sweden’s economy is slowing together with its main Nordic and European trading partners. The outlook is for a sluggish return to moderate growth, but there are sizable downside risks compounded by financial fragilities. Notwithstanding ambitious financial reforms, Sweden’s large banking system remains a potential vulnerability, and household debt is high and still rising.
The priorities are supporting growth and buttressing financial stability.
In the short term, monetary and fiscal policy support should continue to support the recovery, and there is room for additional stimuli if downside risks materialized.
However, Sweden’s main challenge is to further strengthen financial stability. This requires additional steady improvements of banks’ funding and liquidity positions, and—over the medium term—addressing high household debt and accelerating mortgage amortization.
Given the importance of Swedish banks for the region, improving financial stability in Sweden would also contribute to financial stability across the Nordics, as would additional progress toward cross-border burden-sharing agreements.
There is scope to improve the fiscal framework, by ensuring it remains sufficiently countercyclical and introducing an explicit long-term anchor to safeguard a prudent borrowing capacity adequate for countries with large financial sectors such as Sweden.
Structural reforms would add to resilience and growth. To strengthen the impact of recent reforms on employment, it will be important to improve the matching between workers and vacancies, in particular for vulnerable groups. Additional steps to reduce housing market rigidities will open bottlenecks for re-location and support growth.
The Article IV discussions were coordinated with the Nordic Regional Report discussions; the latter covers cross-border financial sector issues in the region and house prices and household debt in a cross-country context.
Approved By
Mahmood Pradhan (EUR) and Ranil Salgado (SPR)
Discussions took place in Stockholm May 20–31, 2013. The staff comprised of Mr. Berger (head), Mr. Agarwal and Ms. Batini (all EUR) and Mr. Cerutti (RES). Mr. de Imus (SPR) joined the mission for one day. Ms. Meyersson, Alternate Executive Director, (OEDSWE) attended for the duration of the mission. Ms. Christiansen and Mr. Dowling (both EUR) provided support from headquarters.
Contents
RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK
A. Recent Economic Developments
B. Outlook and Risks
POLICY AGENDA
A. Sustaining Short-Term Growth
B. Safeguarding Financial Stability
C. Financial Reform and Monetary Policy
D. Calibrating the Fiscal Framework
E. Facilitating Structural Change
STAFF APPRAISAL
BOXES
1. Exchange Rate and Current Account
2. Key Elements of the 2013 Budget and Spring Bills
3. Sweden’s Housing Market and Financial Vulnerabilites
4. Nordic Regional Report: Key Messages
5. Increasing Insurance against Banks’ Foreign Exchange Funding Exposures
6. Sweden’s Fiscal Framework
FIGURES
1. The Bird’s-Eye View
2. Inflation, 2007–13
3. Fiscal Developments, 2004–12
4. Performance of the Banking System, 1970–2013
5. Selected Financial Markets Indicators, 2008–13
6. Household Balance Sheets and Consumption, 2004–13
7. Structural Indicators, 2001–12
TABLES
1. Selected Economic Indicators, 2011–18
2. Balance of Payments Accounts, 2011–18
3. Net International Investment Position, 2005–12
4. General Government Statement of Operations, 2011–18
5. Public Sector Balance Sheet, 2005–12
6. Risk Assessment Matrix
7. Financial System Structure, 2008–12
8. Financial Soundness Indicators: Banks, 2008–12
9. Financial Soundness Indicators: Non-Banks, 2008–12
ANNEXES
1. Recent Financial Policy Initiatives
2. Public Sector Debt Sustainability
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SWEDEN
STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
July 26, 2013
Prepared By
European Department
(In Consultation with Other Departments)
Contents
FUND RELATIONS
STATISTICAL ISSUES
Front Matter Page
Press Release No. 13/325
FOR IMMEDIATE RELEASE
September 5, 2013
International Monetary Fund
Washington, D.C. 20431 USA
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