On November 30, 2015 the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Sweden.
Sweden’s economy is performing well, with real GDP growth of 3.4 percent per year in the first three quarters of 2015, up from 2.3 percent in 2014. Job creation was robust in the first three quarters of 2015, helping bring the unemployment rate down to 7.2 percent in the third quarter. Solid growth of about 3 percent is expected to continue into 2016.
Core inflation (HICP basis) rose to 1.4 percent per year on average in recent months, but remains below the 2 percent target. Since early 2015 the Riksbank has implemented negative interest rates, cutting the repo rate in three steps to -0.35 percent. It is also purchasing 135 billion Swedish Kronor in government bonds in 2015, some 20 percent of the outstanding stock, and further purchases are planned in the first half of 2016.
Migration inflows to Sweden have surged to over 1.5 percent of the population in 2015, with the majority being asylum seekers, and these inflows could remain high. Historical experience is that the employment rates of migrants rise toward the high level of Swedes, but this integration process is lengthy. Unemployment rates among the foreign born, as with the low skilled, are notably higher than the overall unemployment rate.
Housing price inflation has accelerated to 18 percent per year, partly reflecting urban population growth outpacing new housing construction. Mortgage credit growth rose to 8 percent per year in September, lifting household debt to a new high of 176 percent of disposable income, with about 22.5 percent of households with a mortgage having a debt-to-income (DTI) ratio over 500 percent.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.