## _cr15329

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### Executive Board Assessment
- Directors welcomed Sweden’s solid economic growth driven by supportive macroeconomic policies and strong domestic demand.
- Major challenges identified:
  - Sharp rise in migrant inflows.
  - Rapidly rising housing prices and elevated household debt.
  - Inflation that remains below target.
- Policy coordination urged to contain medium-term risks to growth.

### Migration and labor market integration
- Findings:
  - Migration inflows rose to over 1½ percent of the population in 2015 (most being asylum seekers).
  - Projections for 2016 are about 1¼ percent of the population; inflows could remain high in later years.
  - Government spending on refugees (introduction program and transfers to municipalities) budgeted to rise from 0.3 percent of GDP in 2014 to about 0.7 percent by 2017.
  - Supplementary spending of ¼ percent of GDP was recently proposed for 2015; larger additions are expected in 2016 and thereafter.
  - Average processing time for residency permits doubled from 108 days in 2012 to 220 days during Q1–Q3 2015.
  - Reports for average daily inflows over 1,500 persons with the number of asylum seekers reaching about 160,000 in 2015 on updated estimates, up from 83,300 in the earlier official forecast.
- Recommendations:
  - Facilitate integration to reduce lengthy employment integration processes.
  - Broaden job creation and reduce barriers to hiring low-skilled and foreign-born workers.
  - Ensure entry-level wages and employment protection do not impede hiring of groups with high unemployment.
  - Better align training with employers’ needs and improve effectiveness of public job matching services.

### Inflation, monetary policy, and exchange rate stance
- Findings:
  - Inflation remains below target and inflation expectations are weak.
  - Directors endorsed a stimulatory stance of monetary policy to address weak inflation expectations.
  - Support for the Riksbank’s readiness to do more, if needed, until core inflation is durably close to target.
  - Directors considered that foreign exchange intervention should be refrained from except as a last resort given Sweden’s strong external position.
- Recommendation:
  - Continue stimulatory monetary policy until core inflation is durably close to target.

### Fiscal policy
- Findings:
  - Directors agreed that the broadly neutral fiscal stance is appropriate.
  - Balancing the central government budget on average over the cycle would be sufficient to safeguard Sweden’s fiscal buffers.
- Recommendations:
  - Accommodate additional migration-related expenses in the near term.
  - Fund migration-related expenses over time as part of achieving the medium-term fiscal target.

### Housing market and household debt (overview)
- Findings:
  - Rapid housing price increases are associated with rising household indebtedness.
  - The legal framework for macroprudential policies needs strengthening to give the FSA access to a range of tools to address risks in a timely and efficient way.
  - Directors supported planned adoption of a regulation on amortization of high loan-to-value mortgages.
  - Directors recommended limiting the share of mortgages with high debt-to-income ratios to reduce vulnerabilities associated with further housing price increases.
- Policy recommendations to rebalance housing market:
  - Increase housing supply through land sale and planning reforms to facilitate more competition in residential construction.
  - Phase out rent controls (eliminate on new rental apartments and phase out more broadly), with vulnerable households protected by the housing allowance.
  - Phase out mortgage interest deductibility to moderate housing demand over time.
  - Raise the limit on capital gains tax deferrals to release pent up supply.
  - Expand subsidies for building affordable rental apartments in areas with jobs to support a soft landing of housing prices and aid labor mobility and migrant integration.

### Labor market policy (overview)
- Findings:
  - Unemployment rates for the low-skilled and foreign-born are considerably higher than average (unemployment rate fell to 7¼ percent in Q3 from around 8 percent in recent years).
  - Integration into employment for refugees is lengthy despite a well-developed introduction program.
- Recommendations:
  - Reduce high entry-level wages and ease strict employment protection where they act as barriers to hiring groups with high unemployment.
  - Improve effectiveness of training and job-matching services.

### Selected economic projections and key statistics (2012–18)
- Real GDP: -0.3 (2012); 1.2 (2013); 2.3 (2014); 2.9 (2015); 3.0 (2016); 2.7 (2017); 2.4 (2018)
- Domestic demand: -0.6 (2012); 1.6 (2013); 3.4 (2014); 2.5 (2015); 3.3 (2016); 2.7 (2017); 2.5 (2018)
- Private consumption: 0.8 (2012); 1.9 (2013); 2.2 (2014); 2.2 (2015); 2.8 (2016); 2.7 (2017); 2.4 (2018)
- Gross fixed investment: -0.2 (2012); 0.6 (2013); 7.6 (2014); 4.9 (2015); 5.1 (2016); 4.9 (2017); 4.5 (2018)
- HICP inflation (e.o.p): 1.0 (2012); 0.4 (2013); 0.3 (2014); 0.9 (2015); 1.9 (2016); 2.0 (2017); 2.3 (2018)
- Unemployment rate (in percent): 8.0 (2012); 8.0 (2013); 7.9 (2014); 7.5 (2015); 7.4 (2016); 7.3 (2017); 7.2 (2018)
- Gross national saving (percent of GDP): 29.2 (2012); 29.2 (2013); 30.0 (2014); 31.6 (2015); 32.2 (2016); 32.6 (2017); 32.8 (2018)
- Gross domestic investment (percent of GDP): 22.6 (2012); 22.5 (2013); 23.8 (2014); 24.7 (2015); 25.4 (2016); 25.9 (2017); 26.3 (2018)
- Output gap (as a percent of potential): -1.9 (2012); -2.3 (2013); -1.8 (2014); -0.9 (2015); -0.1 (2016); 0.5 (2017); 0.8 (2018)
- Total revenues (percent of GDP): 50.6 (2012); 50.9 (2013); 50.0 (2014); 48.7 (2015); 48.9 (2016); 49.2 (2017); 49.4 (2018)
- Total expenditures (percent of GDP): 51.5 (2012); 52.2 (2013); 51.7 (2014); 49.6 (2015); 49.9 (2016); 49.7 (2017); 49.5 (2018)
- Net lending (percent of GDP): -0.9 (2012); -1.3 (2013); -1.7 (2014); -0.9 (2015); -0.9 (2016); -0.5 (2017); 0.0 (2018)
- General government gross debt: 37.2 (2012); 39.8 (2013); 44.9 (2014); 43.6 (2015); 42.3 (2016); 41.2 (2017); 39.5 (2018)
- M3 (year-on-year, percent change, eop): 3.1 (2012); 3.1 (2013); 4.2 (2014); 7.4 (2015)
- Bank lending to households (year-on-year, percent change, eop): 4.3 (2012); 4.9 (2013); 5.8 (2014); 7.2 (2015)
- Repo rate (end of period): 1.0 (2012); 0.8 (2013); 0.0 (2014); -0.4 (2015)
- Ten-year government bond yield (end of period): 1.5 (2012); 2.4 (2013); 1.0 (2014); 0.7 (2015)
- Mortgage lending rate (for new contracts, end of period): 3.0 (2012); 2.5 (2013); 1.9 (2014); 1.6 (2015)
- Current account (percent of GDP): 6.6 (2012); 6.7 (2013); 6.2 (2014); 6.9 (2015); 6.8 (2016); 6.7 (2017); 6.4 (2018)
- Net international investment position: -14.7 (2012); -18.0 (2013); -0.3 (2014); 2.6 (2015); 4.1 (2016); 5.5 (2017); 7.4 (2018)
- SEK per euro (period average): 8.7 (2012); 8.7 (2013); 9.1 (2014); 9.4 (2015)
- SEK per U.S. dollar (period average): 6.8 (2012); 6.5 (2013); 6.9 (2014); 8.4 (2015)
- Real effective rate (2010=100, based on relative unit labor costs in manufacturing): 92.3 (2012); 94.2 (2013); 89.7 (2014); 82.6 (2015)
- GDP per capita (2014, USD): 58,538
- Population (2014, million): 9.7

### Key policy package recommended
- Monetary:
  - Maintain stimulatory stance until core inflation durably close to target; avoid FX intervention except as last resort.
- Fiscal:
  - Broadly neutral stance; accommodate migration-related near-term expenses; fund these over time and aim for central government balance on average over the cycle.
- Housing and macroprudential:
  - Increase housing supply (land sale and planning reforms); phase out rent controls; phase out mortgage interest deductibility; raise limit on capital gains tax deferrals; expand subsidies for affordable rental apartments; adopt debt-to-income limit; strengthen FSA legal framework and adopt amortization regulation for high LTV mortgages.
- Labor market:
  - Reduce barriers to hiring (entry-level wages, employment protection); improve training and job matching; facilitate migrant integration into employment.

### Housing market imbalances and household leverage (detailed)
- Price and debt dynamics:
  - Dwelling price rises accelerated to 16 percent y/y in September, led by apartment price increases exceeding 20 percent in Stockholm and Gothenburg.
  - Mortgage credit growth of 8 percent y/y in September lifted household debt to 176 percent of disposable income (195 percent including housing associations).
  - Mortgage interest rates averaging 1.6 percent recently.
- Supply and demand drivers:
  - Housing supply constraints: construction impediments and rent controls.
  - Demand drivers: population growth and urbanization, rising income and financial savings, and historically low interest rates.
- Credit distribution:
  - Share with DTI of 300–450 percent has risen in recent years.
  - Share with DTI over 450 percent is high at 29 percent.
  - Loan-to-value (LTV) ceiling: 85 percent.
  - House price-to-income ratio is 32 percent over its 20-year average.
- Valuation estimates:
  - Housing prices estimated about 5½ percent above long-term equilibrium.
  - Housing prices estimated about 12 percent above equilibrium assuming real interest rates at more normal levels.
- Expectations:
  - Net share of households expecting house prices to rise is at record highs.

### Inflation dynamics and monetary instruments (detailed)
- Core inflation (HICP excluding energy and unprocessed food) averaged 1.2 percent y/y in the first ten months of 2015, up from only ½ percent in 2013–14.
- 2-year inflation expectations hit their lowest level since 2000 in January, at 1.2 percent.
- Riksbank actions and stance:
  - Repo rate: reached 0 in October 2014, then cut in three steps in 2015 to -0.35 percent in July.
  - Purchases of government bonds total SEK 135 billion in 2015, some 20 percent of the outstanding stock or 4 percent of GDP.
  - Bond purchases extended until mid-2016 by a further SEK 65 billion.
  - As of October, the krona has depreciated by 4 percent in nominal effective terms from its 2014 average.
  - The negative repo rate is about 3 percentage points below its historical average in real terms.
- Staff projection: core HICP inflation at about 2 percent by end 2017.
- Riksbank options if further easing needed:
  - Further repo rate cuts (noting Danish and Swiss policy rates at -0.75 percent).
  - Purchase more securities, potentially including covered bonds.
  - Launch a lending program via banks for companies.
  - Foreign exchange intervention as a last resort.
- Recommendation:
  - Revise the inflation measure targeted from CPI (which includes mortgage interest costs) to the internationally comparable HICP to reduce communication issues and enhance credibility.

### Macroeconomic outlook, risks, and vulnerability channels
- Growth outlook:
  - Overall growth of about 3 percent y/y is projected in 2015 and 2016, easing to 2½ percent in the medium term.
  - Declining slack expected to broadly close the output gap in 2016.
  - Core HICP inflation expected to rise to about 2 percent in 2017.
- Key downside risk channels if housing vulnerabilities rise:
  - External activity risks: weak euro area or emerging market activity, commodity price falls, krona appreciation from expanded QE in the euro area.
  - International financial risks: more volatile global financial markets could raise credit spreads on Swedish bank funding, raising lending rates and dragging on demand.
  - Domestic risks: escalation of housing price correction risk if double-digit rises continue; uncertainty over migration inflows and potential structural unemployment.
- Vulnerability mechanism:
  - Larger share of highly indebted households increases risk of a prolonged recession after a shock due to wealth effects and debt deleveraging.

### Box 2 — Housing valuation and policy impacts (model findings)
- Main drivers of real housing prices: disposable income, financial assets net of debt, real mortgage rates after tax deductions, and net migration.
- Drivers of household debt: value of the housing stock and real after-tax mortgage rates.
- Estimated deviations from equilibrium:
  - Housing prices about 5½ percent above long-run equilibrium.
  - Household debt about 6¼ percent above long-run equilibrium.
- Interest rate normalization scenario:
  - Real mortgage interest rates are some 1½ percentage points below their average since 2000; an interest rate normalization scenario yields a decrease in housing prices by 12 percent and a decrease in household debt by 11 percent.
- Phasing out mortgage interest deductibility:
  - Gradual elimination—cutting the 30 percent deduction by 5 percentage points per annum—expected to lower housing prices by about 4 percent over 8 years.
  - Household debt declining 5½ percent over 11 years.
- Expanding housing supply:
  - Government plan: cumulative increase in the housing stock to 250,000 dwellings over the medium term.
  - Reaching target requires 60,000 additional dwellings than baseline, a 1.3 percent addition to the housing stock.
  - Estimated real housing price reduction of only 1.4 percent by 2020 from this supply expansion.

### Prudential policy, banking sector, and macroprudential tools
- Banking sector health:
  - Swedish banks appear healthy; capital adequacy and profitability ratios are solid and funding structures are close to Basel III requirements, although banks have a relatively high share of debt securities due in less than 1 year.
  - The FSA is reviewing risk weights on corporate loans.
- Macroprudential vulnerabilities and tools:
  - 2010 LTV ceiling of 85 percent; new mortgages having an average LTV of 70 percent in 2014.
  - Households can take on more debt relative to income as house prices rise, increasing share of households with high DTI ratios and sensitivity to interest rate fluctuations and price declines.
- DTI limit recommendation:
  - A DTI limit would safeguard financial resilience while containing drag on growth; international practice examples: UK 450 percent, Ireland 350 percent with portions of new mortgages allowed to exceed thresholds.
  - A bank reported applying its own DTI limit of about 500 percent on new mortgages.
- Amortization requirements:
  - 68 percent of new mortgage loans were amortized in 2014, up from 42 percent in 2011.
  - FSA proposed regulations in November 2014 for minimum amortization (2 percent when LTV >70 percent; 1 percent when LTV >50 percent) but was withdrawn after a court questioned mandate; legislation proposed to authorize the FSA to adopt an amortization requirement with government approval by around mid-2016.
- Strengthening FSA mandate and regional cooperation:
  - Urgent need to strengthen the FSA’s legal mandate to deploy a range of macroprudential tools with suitable checks and balances.
  - If targeted macroprudential tools are delayed, banks’ capital buffers may need to be further increased.
  - Enhance regional cooperation on financial stability for large cross-border banks, including Nordea’s branch-structure plans.
- Macroprudential instrument status (as reported):
  - Countercyclical capital buffer: To be raised to 1.5 percent in June 2016.
  - Capital conservation buffer: 2.5
  - Systemic risk buffer: 3
  - Additional buffer for systemically important inst.: 2
  - Mortgage risk weight floor: 25
  - Liquidity coverage ratio (all currency, usd, euro): 100
  - Loan-to-value: 85

### Labor market, integration, and gender issues
- Labor market outcomes:
  - Job creation since 2007 largely focused on higher skilled workers; low-skilled unemployment rate 19 percent.
  - Employment of the foreign-born has risen substantially, but their unemployment rate is 16 percent, compared with total unemployment of 7¼ percent.
  - Integration lengthy—about 10 years to reach an employment rate of 60 percent for migrants under historical patterns.
- Policy recommendations:
  - Ensure entry-level wages are not a barrier: enhance wage flexibility or introduce special wage scales for on-the-job training; use social supports and tax credits to cushion disposable incomes.
  - Review employment protection law to ensure exit costs do not deter firms from hiring new entrants with sufficient skills.
  - Provide training better aligned with employer needs; target early active labor market support where long-term unemployment risk is high.
  - Improve public job matching services and expand employer contacts; combine wage subsidies with better matching.
- Female labor participation and senior management:
  - Female labor force participation among 25–54 year olds: 88 percent in Sweden (2014) versus 81 percent EU average.
  - Gender wage gap: 13 percentage points in Sweden versus 16 percent EU average.
  - Female representation in management: 27 percent in Sweden, below EU-27 average of 33 percent.
  - Share of women on supervisory boards: 26 percent in Sweden versus 16 percent EU-27.
  - Potential output gains from gender equity in participation and hours: could lift Sweden’s potential output by 6 percent.

### Public finances, fiscal framework, and housing tax measures
- Budget 2016 and fiscal stance:
  - Budget Bill for 2016 targets a deficit just under 1 percent of GDP.
  - New initiatives in the budget of 0.6 percent of GDP include spending on housing construction subsidies, welfare, education, and migrant integration.
  - Rises in sickness leave benefits and migration-related spending are about ¼ percent of GDP in 2016.
  - Structural balance in 2016 projected little changed from 2015, at about -0.7 percent of GDP.
  - Broadly neutral fiscal stance appropriate to avoid impeding monetary policy efforts to raise inflation.
- Housing tax reforms recommended (fiscally neutral package):
  - Phasing out mortgage interest deductibility:
    - Deductibility of 30 percent of interest costs (21 percent above SEK 100,000) currently costs about ½ percent of GDP.
    - Gradual reduction (e.g., 5 percentage points annually) estimated to lower house prices by about 4 percent over eight years and reduce debt about 5½ percent over 11 years.
  - Adjusting capital gains taxes to enhance effective supply: raising the threshold for deferring capital gains taxes on primary dwellings would facilitate turnover.
  - Supporting construction of affordable rental property in locations with jobs:
    - The 2016 budget allocates 0.1 percent of GDP annually to subsidizing such construction.

### External position, exchange rate, and foreign currency reserves
- External assessment (staff):
  - Staff assesses the krona to be undervalued by about 10 percent in 2015.
  - Staff assesses Sweden’s adjusted current account norm to be around 2½–6½ percent of GDP, implying a current account gap in the range of 0 to 5 percent of GDP in 2015.
  - REER gap assessed to be in the lower end of the -11 to -1 percent range in 2015.
- Foreign currency reserves:
  - Reserves stood at US$50.5 billion in September 2015, equivalent to about 40 percent of Swedish banks’ short term foreign currency liabilities.
  - Given high dependence of Swedish banks on wholesale funding in foreign currency and past disruptions, maintaining adequate foreign currency liquidity buffers is prudent.

### Risk Assessment Matrix (selected risks and policy responses)
- Euro area bond market contagion:
  - Overall level of concern: Medium.
  - Relative likelihood: Medium.
  - Impact if realized: Higher bank funding costs, higher lending interest rates, curtailed lending, weighing on growth; adverse impact partially mitigated by safe-haven flows.
  - Policy response: Reduce financial sector vulnerabilities, preserve fiscal buffers, provide liquidity support including in foreign currency using Sweden’s borrowed reserves and possible swap arrangements.
- Protracted weak growth in key advanced and emerging economies (including the Euro area and China):
  - Overall level of concern: Medium-High.
  - Relative likelihood: Medium.
  - Impact if realized: Exports and income decline, investment slows, inflation declines; sensitivity increased by high household debt and limited space for additional monetary easing.
  - Policy response: Provide additional monetary support, let automatic fiscal stabilizers operate fully, consider slower structural fiscal adjustment.
- Significant house price decline in Sweden:
  - Overall level of concern: Medium.
  - Relative likelihood: High.
  - Impact if realized: Large impact on consumption and employment, lower growth; loan quality impacted, primarily of firms serving domestic market; lending could be curtailed if doubts about covered bonds quality rise, elevating bank funding costs.
  - Policy response: Preventively reduce housing market vulnerabilities through macroprudential measures, phasing out tax incentives, and enhancing housing supply; in the event, provide monetary stimulus and funding support to banks.

*Source: IMF staff report for the 2015 Article IV consultation with Sweden.*

### 22.5 percent of households with a mortgage having a debt-to-income (DTI) ratio over

### 22.5 percent of households with a mortgage having a debt-to-income (DTI) ratio over 500 percent.

### Executive Board Assessment
- Directors welcomed Sweden’s solid economic growth driven by supportive macroeconomic policies and strong domestic demand.
- Major challenges identified:
  - Sharp rise in migrant inflows.
  - Rapidly rising housing prices and elevated household debt.
  - Inflation that remains below target.
- Policy coordination urged to contain medium-term risks to growth.

### Migration and labor market integration
- Findings:
  - Migration inflows rose to over 1½ percent of the population in 2015 (most being asylum seekers).
  - Projections for 2016 are about 1¼ percent of the population; inflows could remain high in later years.
  - Government spending on refugees (introduction program and transfers to municipalities) budgeted to rise from 0.3 percent of GDP in 2014 to about 0.7 percent by 2017.
  - Supplementary spending of ¼ percent of GDP was recently proposed for 2015; larger additions are expected in 2016 and thereafter.
  - Average processing time for residency permits doubled from 108 days in 2012 to 220 days during Q1–Q3 2015.
  - Reports for average daily inflows over 1,500 persons with the number of asylum seekers reaching about 160,000 in 2015 on updated estimates, up from 83,300 in the earlier official forecast.
- Recommendations:
  - Facilitate integration to reduce lengthy employment integration processes.
  - Broaden job creation and reduce barriers to hiring low-skilled and foreign-born workers.
  - Ensure entry-level wages and employment protection do not impede hiring of groups with high unemployment.
  - Better align training with employers’ needs and improve effectiveness of public job matching services.

### Inflation, monetary policy, and exchange rate stance
- Findings:
  - Inflation remains below target and inflation expectations are weak.
  - Directors endorsed a stimulatory stance of monetary policy to address weak inflation expectations.
  - Support for the Riksbank’s readiness to do more, if needed, until core inflation is durably close to target.
  - Directors considered that foreign exchange intervention should be refrained from except as a last resort given Sweden’s strong external position.
- Recommendation:
  - Continue stimulatory monetary policy until core inflation is durably close to target.

### Fiscal policy
- Findings:
  - Directors agreed that the broadly neutral fiscal stance is appropriate.
  - Balancing the central government budget on average over the cycle would be sufficient to safeguard Sweden’s fiscal buffers.
- Recommendations:
  - Accommodate additional migration-related expenses in the near term.
  - Fund migration-related expenses over time as part of achieving the medium-term fiscal target.

### Housing market and household debt
- Findings:
  - Rapid housing price increases are associated with rising household indebtedness.
  - The legal framework for macroprudential policies needs strengthening to give the FSA access to a range of tools to address risks in a timely and efficient way.
  - Directors supported planned adoption of a regulation on amortization of high loan-to-value mortgages.
  - Directors recommended limiting the share of mortgages with high debt-to-income ratios to reduce vulnerabilities associated with further housing price increases.
- Policy recommendations to rebalance housing market:
  - Increase housing supply through land sale and planning reforms to facilitate more competition in residential construction.
  - Phase out rent controls (eliminate on new rental apartments and phase out more broadly), with vulnerable households protected by the housing allowance.
  - Phase out mortgage interest deductibility to moderate housing demand over time.
  - Raise the limit on capital gains tax deferrals to release pent up supply.
  - Expand subsidies for building affordable rental apartments in areas with jobs to support a soft landing of housing prices and aid labor mobility and migrant integration.

### Labor market policy
- Findings:
  - Unemployment rates for the low-skilled and foreign-born are considerably higher than average (unemployment rate fell to 7¼ percent in Q3 from around 8 percent in recent years).
  - Integration into employment for refugees is lengthy despite a well-developed introduction program.
- Recommendations:
  - Reduce high entry-level wages and ease strict employment protection where they act as barriers to hiring groups with high unemployment.
  - Improve effectiveness of training and job-matching services.

### Selected economic projections and key statistics (2012–18)
- Real GDP: -0.3 (2012); 1.2 (2013); 2.3 (2014); 2.9 (2015); 3.0 (2016); 2.7 (2017); 2.4 (2018)
- Domestic demand: -0.6 (2012); 1.6 (2013); 3.4 (2014); 2.5 (2015); 3.3 (2016); 2.7 (2017); 2.5 (2018)
- Private consumption: 0.8 (2012); 1.9 (2013); 2.2 (2014); 2.2 (2015); 2.8 (2016); 2.7 (2017); 2.4 (2018)
- Gross fixed investment: -0.2 (2012); 0.6 (2013); 7.6 (2014); 4.9 (2015); 5.1 (2016); 4.9 (2017); 4.5 (2018)
- HICP inflation (e.o.p): 1.0 (2012); 0.4 (2013); 0.3 (2014); 0.9 (2015); 1.9 (2016); 2.0 (2017); 2.3 (2018)
- Unemployment rate (in percent): 8.0 (2012); 8.0 (2013); 7.9 (2014); 7.5 (2015); 7.4 (2016); 7.3 (2017); 7.2 (2018)
- Gross national saving (percent of GDP): 29.2 (2012); 29.2 (2013); 30.0 (2014); 31.6 (2015); 32.2 (2016); 32.6 (2017); 32.8 (2018)
- Gross domestic investment (percent of GDP): 22.6 (2012); 22.5 (2013); 23.8 (2014); 24.7 (2015); 25.4 (2016); 25.9 (2017); 26.3 (2018)
- Output gap (as a percent of potential): -1.9 (2012); -2.3 (2013); -1.8 (2014); -0.9 (2015); -0.1 (2016); 0.5 (2017); 0.8 (2018)
- Total revenues (percent of GDP): 50.6 (2012); 50.9 (2013); 50.0 (2014); 48.7 (2015); 48.9 (2016); 49.2 (2017); 49.4 (2018)
- Total expenditures (percent of GDP): 51.5 (2012); 52.2 (2013); 51.7 (2014); 49.6 (2015); 49.9 (2016); 49.7 (2017); 49.5 (2018)
- Net lending (percent of GDP): -0.9 (2012); -1.3 (2013); -1.7 (2014); -0.9 (2015); -0.9 (2016); -0.5 (2017); 0.0 (2018)
- General government gross debt: 37.2 (2012); 39.8 (2013); 44.9 (2014); 43.6 (2015); 42.3 (2016); 41.2 (2017); 39.5 (2018)
- M3 (year-on-year, percent change, eop): 3.1 (2012); 3.1 (2013); 4.2 (2014); 7.4 (2015)
- Bank lending to households (year-on-year, percent change, eop): 4.3 (2012); 4.9 (2013); 5.8 (2014); 7.2 (2015)
- Repo rate (end of period): 1.0 (2012); 0.8 (2013); 0.0 (2014); -0.4 (2015)
- Ten-year government bond yield (end of period): 1.5 (2012); 2.4 (2013); 1.0 (2014); 0.7 (2015)
- Mortgage lending rate (for new contracts, end of period): 3.0 (2012); 2.5 (2013); 1.9 (2014); 1.6 (2015)
- Current account (percent of GDP): 6.6 (2012); 6.7 (2013); 6.2 (2014); 6.9 (2015); 6.8 (2016); 6.7 (2017); 6.4 (2018)
- Net international investment position: -14.7 (2012); -18.0 (2013); -0.3 (2014); 2.6 (2015); 4.1 (2016); 5.5 (2017); 7.4 (2018)
- SEK per euro (period average): 8.7 (2012); 8.7 (2013); 9.1 (2014); 9.4 (2015)
- SEK per U.S. dollar (period average): 6.8 (2012); 6.5 (2013); 6.9 (2014); 8.4 (2015)
- Real effective rate (2010=100, based on relative unit labor costs in manufacturing): 92.3 (2012); 94.2 (2013); 89.7 (2014); 82.6 (2015)
- GDP per capita (2014, USD): 58,538
- Population (2014, million): 9.7

### Key policy package recommended
- Monetary: Maintain stimulatory stance until core inflation durably close to target; avoid FX intervention except as last resort.
- Fiscal: Broadly neutral stance; accommodate migration-related near-term expenses; fund these over time and aim for central government balance on average over the cycle.
- Housing and macroprudential: Increase housing supply (land sale and planning reforms); phase out rent controls; phase out mortgage interest deductibility; raise limit on capital gains tax deferrals; expand subsidies for affordable rental apartments; adopt debt-to-income limit; strengthen FSA legal framework and adopt amortization regulation for high LTV mortgages.
- Labor market: Reduce barriers to hiring (entry-level wages, employment protection); improve training and job matching; facilitate migrant integration into employment.

*Source: IMF staff report for the 2015 Article IV consultation with Sweden.*

### 4.      The housing market shows imbalances, with double-digit price gains as the urban

### _cr15329 - 4.      The housing market shows imbalances, with double-digit price gains as the urban

### Housing market imbalances and household leverage
- Dwelling price rises accelerated to 16 percent y/y in September, led by apartment price increases exceeding 20 percent in Stockholm and Gothenburg.
- Mortgage credit growth of 8 percent y/y in September lifted household debt to 176 percent of disposable income (195 percent including housing associations).
- Housing supply constraints: construction impediments and rent controls.
- Demand drivers: population growth and urbanization, rising income and financial savings, and historically low interest rates.
- Distribution of debt-to-income (DTI) ratios for new mortgage borrowers:
  - Share with DTI of 300–450 percent has risen in recent years.
  - Share with DTI over 450 percent is high at 29 percent.
- Loan-to-value (LTV) ceiling: 85 percent.
- House price-to-income ratio is 32 percent over its 20-year average.
- Estimated overvaluation:
  - Housing prices estimated about 5½ percent above long-term equilibrium.
  - Housing prices estimated about 12 percent above equilibrium assuming real interest rates at more normal levels.
- Net share of households expecting house prices to rise is at record highs.
- Mortgage interest rates averaging 1.6 percent recently.

### Inflation dynamics and expectations
- Core inflation (HICP excluding energy and unprocessed food) averaged 1.2 percent y/y in the first ten months of 2015, up from only ½ percent in 2013–14.
- Declining resource utilization during 2011 to mid-2013, commodity price falls, low euro area inflation, and past krona appreciation contributed to low inflation.
- 2-year inflation expectations hit their lowest level since 2000 in January, at 1.2 percent.
- Wage indicators have slowed; employers questioned using the inflation target for the coming collective bargaining round covering two-thirds of agreements.

### Monetary policy stance and instruments
- The Riksbank introduced negative rates and a QE program in February 2015.
  - Repo rate: reached 0 in October 2014, then cut in three steps in 2015 to -0.35 percent in July.
  - Purchases of government bonds total SEK 135 billion in 2015, some 20 percent of the outstanding stock or 4 percent of GDP.
  - Bond purchases extended until mid-2016 by a further SEK 65 billion.
- As of October, the krona has depreciated by 4 percent in nominal effective terms from its 2014 average.
- The negative repo rate is about 3 percentage points below its historical average in real terms.
- Recent inflation out-turns: core HICP up from ½ percent y/y in 2014 to 1.4 percent y/y in recent months (partly due to krona depreciation).
- Staff projection: core HICP inflation at about 2 percent by end 2017.
- Riksbank options if further easing needed:
  - Further repo rate cuts (noting Danish and Swiss policy rates at -0.75 percent).
  - Purchase more securities, potentially including covered bonds.
  - Launch a lending program via banks for companies.
  - Foreign exchange intervention as a last resort.
- Recommendation: maintain stimulatory stance until core inflation is durably close to target.
- Recommendation: revise the inflation measure targeted from CPI (which includes mortgage interest costs) to the internationally comparable HICP to reduce communication issues and enhance credibility.

### Macroeconomic outlook and risks
- Growth outlook:
  - Overall growth of about 3 percent y/y is projected in 2015 and 2016, easing to 2½ percent in the medium term.
  - Declining slack expected to broadly close the output gap in 2016.
  - Core HICP inflation expected to rise to about 2 percent in 2017.
- Downside risk channels if housing vulnerabilities rise:
  - External activity risks: weak euro area or emerging market activity, commodity price falls, krona appreciation from expanded QE in the euro area.
  - International financial risks: more volatile global financial markets could raise credit spreads on Swedish bank funding, raising lending rates and dragging on demand.
  - Domestic risks: escalation of housing price correction risk if double-digit rises continue; uncertainty over migration inflows and potential structural unemployment.
- Vulnerability mechanism: larger share of highly indebted households increases risk of a prolonged recession after a shock due to wealth effects and debt deleveraging (experiences of Denmark and the Netherlands noted).

### Box 2 — Housing valuation and policy impacts (model findings)
- Main drivers of real housing prices: disposable income, financial assets net of debt, real mortgage rates after tax deductions, and net migration.
- Drivers of household debt: value of the housing stock and real after-tax mortgage rates.
- Estimated deviations from equilibrium:
  - Housing prices about 5½ percent above long-run equilibrium.
  - Household debt about 6¼ percent above long-run equilibrium.
- Real mortgage interest rates are some 1½ percentage points below their average since 2000; an interest rate normalization scenario yields:
  - Decrease in housing prices by 12 percent.
  - Decrease in household debt by 11 percent.
- Phasing out mortgage interest deductibility:
  - Gradual elimination—cutting the 30 percent deduction by 5 percentage points per annum—expected to lower housing prices by about 4 percent over 8 years.
  - Household debt declining 5½ percent over 11 years.
- Expanding housing supply:
  - Government plan: cumulative increase in the housing stock to 250,000 dwellings over the medium term.
  - Reaching target requires 60,000 additional dwellings than baseline, a 1.3 percent addition to the housing stock.
  - Estimated real housing price reduction of only 1.4 percent by 2020 from this supply expansion.

### Policy recommendations and coordination
- Monetary policy: keep a firmly stimulatory stance to return inflation to target and avoid prolonged low inflation that would reduce policy space.
- Structural reforms and fiscal measures: rebalance housing supply and demand to address house price and household debt vulnerabilities; benefits accrue over time.
- Prudential measures: well targeted, calibrated to protect household financial resilience while avoiding significant drag on domestic demand that would counteract monetary stimulus.
- Fiscal stance: Sweden’s fiscal position provides room for a broadly neutral stance in the near term and to meet potential migration costs over the medium term while undertaking reforms.
- Authorities’ view: broadly similar macroeconomic projections; rising concerns about housing price increases with varying views on the scale of macroeconomic vulnerabilities (Riksbank most concerned).

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15329.pdf*

### 19.      Authorities’ views. The authorities shared the same perspective on the monetary policy

### _cr15329 - 19.      Authorities’ views. The authorities shared the same perspective on the monetary policy

### Monetary policy stance and authorities’ view
- The authorities shared the same perspective on the monetary policy stance.  
- The Riksbank noted that it had called for macroprudential measures to address vulnerabilities.  
- Any change in the inflation measure targeted was best considered once inflation was back at target.

### External Assessment (Box 3) — staff findings and projections
- The External Balance Assessment (EBA) methodology suggests that in 2015 the krona is substantially undervalued.  
- Since the beginning of 2015, the Riksbank shifted to negative rates and a QE program, leading to an 8 percent depreciation of the real effective exchange rate (REER) as of August 2015 compared with the average for 2014—partly reversed with recent appreciation.  
- The REER gap widened from 2014, when the krona was assessed to be moderately undervalued.  
- Factors affecting Sweden’s external position:
  - The krona is freely floating and there are no policy distortions impacting the current account.
  - Demographic and institutional factors: Sweden’s high saving rate (reinforced by pension and welfare reforms since the mid-1990s, including a shift to a defined contributions pension scheme and a decline in transfers) influences the current account.
  - Structural factors not fully captured by EBA: Sweden as a regional financial center (banking assets over 400 percent of GDP, of which about 170 percent of GDP in assets are outside Sweden) and significant role in merchanting trade, which have led to persistently larger current account balances.
  - Statistical issues: Swedish net IIP is near balance at -0.3 percent of GDP in 2014, with gross external liabilities at 294 percent of GDP; the increase over time in the net IIP is generally smaller than cumulative current account balances, partly explained by negative valuation effects.
- Staff assessment and implications:
  - Staff assesses the krona to be undervalued by about 10 percent, as a significant part of the Swedish current account surplus is structural.
  - Staff assesses Sweden’s adjusted current account norm to be around 2½–6½ percent of GDP, implying a current account gap in the range of 0 to 5 percent of GDP in 2015.
  - The REER gap is assessed to be in the lower end of the -11 to -1 percent range in 2015, considering the EBA REER analysis.
  - The undervaluation is expected to be temporary, with the krona likely to appreciate once the monetary easing cycle ends; the timing is uncertain but could happen as early as 2016 under the Riksbank’s forecasts.
  - Reflecting partly the temporary krona weakness, staff projects only a modest rise in the current account in 2015 followed by a slow decline over the medium term.
- Foreign currency reserves:
  - Reserves stood at US$50.5 billion in September 2015, equivalent to about 40 percent of Swedish banks’ short term foreign currency liabilities.
  - Given high dependence of Swedish banks on wholesale funding in foreign currency and past disruptions, maintaining adequate foreign currency liquidity buffers is prudent.

### Fiscal policy (Section B) — targets, stance, and recommendations
- Budget 2016 targets and composition:
  - The Budget Bill for 2016 targets a deficit just under 1 percent of GDP.
  - New initiatives in the budget of 0.6 percent of GDP include spending on housing construction subsidies, welfare, education, and migrant integration.
  - Funding for new initiatives comes from reduced tax deductibility for dwelling repairs and improvements, higher energy taxes, and a gradual tapering of the amount of the earned income tax credit as income rises.
  - Rises in sickness leave benefits and migration-related spending are about ¼ percent of GDP in 2016.
  - Capital gains revenues are projected to decline from high levels in 2015.
  - Consolidation elsewhere yields a budget deficit target of 0.9 percent of GDP in 2016, the same level as projected for 2015.
- Fiscal stance and near-term guidance:
  - The structural balance in 2016 is projected to be little changed from 2015, at about -0.7 percent of GDP.
  - This broadly neutral fiscal stance is appropriate to avoid impeding monetary policy efforts to raise inflation.
  - If migration-related expenses exceed budget assumptions—perhaps around ½ percent of GDP in 2016—they should be accommodated in the near term and funded over time as part of achieving medium-term fiscal targets.
  - Investments to help migrants gain jobs will reduce medium-term costs and maximize contributions to growth.
  - Discretionary fiscal stimulus is not warranted given solid growth prospects; full operation of the automatic stabilizers should be allowed.
- Medium-term fiscal framework:
  - Maintaining balance over the cycle is sufficient to safeguard Sweden’s fiscal buffers, but there is a need to raise the fiscal balance over the medium term.
  - Long-standing fiscal target of a 1 percent of GDP surplus over the cycle has reduced public debt to 44 percent in 2015.
  - Government proposal to lower the target to balance over the cycle would allow growth to erode the debt ratio over time; the fiscal target should be reviewed periodically to remain consistent with a prudent level of public debt or net worth.
  - Coverage could be narrowed to exclude the defined contribution pension system so the central government balance need not be adjusted to offset pension balance variations.
- Housing market rebalancing recommendations:
  - Sweden’s tax system strongly favors debt-financed home ownership, disproportionately benefiting higher income households.
  - A preferred measure is raising property tax, but politically difficult; instead a fiscally neutral package of measures is recommended:
    - Phasing out mortgage interest deductibility:
      - Deductibility from income tax liabilities of 30 percent of interest costs (21 percent above SEK 100,000) currently costs about ½ percent of GDP.
      - A gradual reduction, such as by 5 percentage points annually, would have little drag on growth; estimated impact on house prices is modest, at about 4 percent over eight years, while debt declines about 5½ percent over 11 years (Box 2).
    - Adjusting capital gains taxes to enhance effective supply: raising the threshold for deferring capital gains taxes on primary dwellings would facilitate turnover.
    - Supporting construction of affordable rental property in locations with jobs:
      - The 2016 budget allocates 0.1 percent of GDP annually to subsidizing such construction.
      - This additional supply is expected to have small price impacts and likely needs to be expanded alongside reducing housing supply impediments.
- Authorities’ views on fiscal policy:
  - The authorities agreed that a broadly neutral fiscal stance is appropriate and intend to accommodate additional migration-related costs in the near term.
  - The 2016 budget sets out a gradual rise in the fiscal balance in the medium term; they welcomed support for targeting balance over the cycle.
  - The Government has so far not favored reducing mortgage interest deductibility, partly to avoid risks of a “hard landing” in the housing market.

### Prudential policy (Section C) — banking sector health and macroprudential measures
- Banking sector health and capital:
  - Swedish banks appear healthy; capital adequacy and profitability ratios are solid and funding structures are close to Basel III requirements, although banks have a relatively high share of debt securities due in less than 1 year.
  - Strong regulatory capital ratios benefit from declining risk weights as internal ratings based models are partly driven by low default rates in recent years.
  - The Financial Supervisory Authority (FSA) is reviewing risk weights on corporate loans.
- Macroprudential vulnerabilities and tools:
  - Macroprudential policies have been strengthened, but vulnerabilities can increase as house prices rise; in 2010 the FSA established a Loan-to-Value (LTV) ceiling of 85 percent, with new mortgages having an average LTV of 70 percent in 2014.
  - Households can take on more debt relative to income as house prices rise, increasing share of households with high debt to income (DTI) ratios and sensitivity to interest rate fluctuations and price declines.
- Debt-to-Income (DTI) limit recommendation:
  - A DTI limit would safeguard financial resilience while containing drag on growth, but cannot substitute for housing market reforms.
  - Limits would aim to avoid further rises in the share of high DTI loans; a UK-style or Ireland-style approach (UK 450 percent, Ireland 350 percent) allows a portion of new mortgages (15 and 20 percent respectively) to exceed thresholds.
  - A similar calibrated approach in Sweden would initially constrain few households; over time it would protect resilience by reducing LTV ratios, with effects concentrated in main centers like Stockholm.
  - A bank reported applying its own DTI limit of about 500 percent on new mortgages.
- Amortization requirements:
  - Amortization culture has shifted: 68 percent of new mortgage loans were amortized in 2014, up from 42 percent in 2011.
  - FSA proposed regulations in November 2014 for minimum amortization of 2 percent of the original loan when LTV is over 70 percent and 1 percent when LTV is over 50 percent—but this was later withdrawn after a court questioned the FSA’s mandate.
  - In September (year implied in source) authorities proposed legislation authorizing the FSA to adopt an amortization requirement for consultation, with the specific FSA regulation subject to government approval, completing these steps by around mid-2016.
  - As most higher-LTV mortgages are already amortizing, the impact on demand is expected to be small; effects on debt will be gradual as only new mortgages would be covered. The adequacy of debt amortization should be kept under review.
- Strengthening macroprudential framework and regional cooperation:
  - The legal mandate for the FSA does not ensure it can take certain measures principally aimed at protecting macroeconomic stability, as evidenced by the amortization case; there is an urgent need to strengthen the FSA’s legal mandate to deploy a range of macroprudential tools with suitable checks and balances.
  - If targeted macroprudential tools are delayed, banks’ capital buffers may need to be further increased.
  - Regional cooperation on financial stability should be enhanced, especially for large cross-border banks: Nordea plans to change to a branch structure and has assets outside Sweden amounting to over 100 percent of Sweden’s GDP; robust cross-border cooperation and information sharing across Swedish, regional, and European authorities is essential for supervision, depositor protection, and resolution.
- Macroprudential instrument status (as reported):
  - Countercyclical capital buffer: *To be raised to 1.5 percent in June 2016 (note: listed in table as an instrument).
  - Capital conservation buffer: 2.5
  - Systemic risk buffer: 3
  - Additional buffer for systemically important inst.: 2
  - Mortgage risk weight floor: 25
  - Liquidity coverage ratio (all currency, usd, euro): 100
  - Loan-to-value: 85
- Authorities’ views on prudential policy:
  - The authorities are monitoring housing market and household debt developments closely.
  - They favor assessing the impact of amortization requirements before taking further steps given uncertainty around macroprudential impacts.
  - A DTI limit is among tools that could be considered.
  - The FSA noted it presently has several macroprudential tools for financial stability or consumer protection and that the legal mandate for the FSA to implement an amortization requirement is being strengthened.
  - There is ongoing discussion on further strengthening the FSA legal mandate to implement macroprudential tools.
  - The Riksbank believes further measures and tools are urgently needed and that housing market reforms are key.
  - Authorities are monitoring Nordea’s branch-structure plans and agree on the importance of continued close supervisory and resolution cooperation regionally and in Europe.

### Labor market policy (Section D) — challenges and reform options
- Labor market outcomes and vulnerabilities:
  - Labor force participation has risen, partly reflecting rising female participation and higher participation among young, older, and foreign-born workers.
  - Job creation since 2007 has been largely focused on higher skilled workers, leaving low-skilled with an unemployment rate of 19 percent.
  - Employment of the foreign-born has risen substantially, but their unemployment rate is 16 percent, compared with total unemployment of 7¼ percent.
  - High entry-level wages (75–80 percent of average wages) and strict employment protection for regular contracts contribute to wide unemployment gaps.
  - Historically, migrants’ employment rates rise toward Swedes’ levels but integration is lengthy—about 10 years to reach an employment rate of 60 percent—so large migration inflows could raise unemployment unless integration pace improves.
- Policy recommendations to facilitate job creation and integration:
  - Ensure entry-level wages are not a barrier for high-unemployment groups: enhance wage flexibility at the firm level or introduce special wage scales for on-the-job training; use social supports and tax credits to cushion disposable incomes.
  - Review employment protection law to ensure exit costs do not deter firms from hiring new entrants with sufficient skills.
  - Provide training better aligned with employer needs to help vulnerable groups gain jobs.
  - Target early active labor market support to cases of high long-term unemployment risk.
  - Improve public job matching services, including expanding contacts with employers; combining wage subsidies with better matching would enhance employment benefits.

_Italic: Source: _cr15329 - 19.      Authorities’ views. The authorities shared the same perspective on the monetary policy_

### 34.      Faster integration of refugees into the labor market would maximize their

### _cr15329 - 34.      Faster integration of refugees into the labor market would maximize their

### Refugee integration and labor market participation
- Faster integration of refugees into the labor market would maximize their contributions to the Swedish economy.
- Sweden has a well-developed introduction program for refugees; authorities are implementing improvements including:
  - “fast tracks” initiative for migrants with skills in occupations where there is a shortage.
  - changing the reception system to designate municipalities to receive refugees based mostly on job opportunities.
- Further efforts needed given rising numbers:
  - Expedite residency permit, educational assessment, and skill validation processes.
  - Expand employment programs for youth that combine work and training, such as the vocational introduction employment program, to also cover newly arrived refugees to help them gain their first job quickly and build needed skills.

### Authorities’ views on employment measures
- Authorities agree on the importance of enhancing training and job matching.
- Noted issues and observations:
  - Relatively low take up of some wage subsidies raises doubts whether wage floors are the only barriers to employment of vulnerable groups.
  - Impact of employment protection is mitigated by temporary contracts with low protection.
- Social partners’ perspectives:
  - Labor unions stress protecting minimum wages—at least 75 percent of average wages—as a key pillar and consider expanding employment subsidies, including to higher skill jobs.
  - Employers note the relatively small share of low skill jobs available in Sweden and point to the need to ease wage compression both within and across sectors to help the low skilled and migrants gain jobs.

### Female labor participation and senior management representation (Box 4)
- Policy achievements and outcomes:
  - Policies such as parental leave, subsidized child care, and scope for shorter working hours have made it easier for women to enter the workforce and return following childbirth.
  - In 2014, female labor force participation among the 25 to 54 year olds stood at 88 percent in Sweden, compared with the European Union average of 81 percent.
  - The gender gap in wages is 13 percentage points in Sweden, lower than the EU average of 16 percent.
  - Women in Sweden are much less likely to participate in the labor force on a part time basis compared with several other advanced European countries.
- Potential output gains:
  - Gender equity in participation rates and hours worked could lift Sweden’s potential output by 6 percent.
  - Room for output gains from gender equity is smaller in Sweden than in most countries given the already high female employment rate, but shifting from part-time to full-time work could still raise potential output notably over time.
- Senior management and board representation:
  - Female representation in management: 27 percent in Sweden, below the EU-27 average of 33 percent.
  - Share of women on supervisory boards: 26 percent in Sweden versus 16 percent for the EU-27.
  - Among firms with at least two members in senior management, only 42 percent have at least one woman in a senior position.
  - The average share of females in total senior management and board members is also less than 20 percent across all firms.
- Evidence on firm performance:
  - Firm-level analysis finds higher female participation in senior management is associated with better firm financial performance on average, particularly pronounced in sectors with a higher prevalence of women in the labor force, such as the services sector.
- Note on quotas:
  - To comply with the European Commission’s proposed 40 percent objective for females in board positions, some countries have adopted legal quotas; such a quota has not been adopted in Sweden.

### Housing policy: supply constraints and reforms
- Key findings on housing supply:
  - Housing supply is falling behind needs owing to impediments to competition and rent controls.
  - Rising residential property prices reflect urbanization and migration trends together with a limited supply response in urban centers.
  - Construction response is inadequate despite rising profitability in the construction sector; low competition partly reflects municipal land acquisition and planning systems that are complex and time consuming, favoring larger companies and those with local knowledge.
  - Rent controls reduce supply of rental apartments by driving conversion into tenant ownership, deterring new construction, and causing “lock in” effects that hinder efficient utilization of rental supply.
  - Long waiting lists for rental homes force many young households to buy rather than rent.
- Recommended reforms to enhance housing supply:
  - Build affordable rental housing in or near main centers where job prospects are best to promote labor mobility and support migrant integration.
  - Enhance land acquisition and planning procedures:
    - Central government could incentivize municipalities to make processes more transparent, standardized, and timely.
    - Municipalities could grant “use it or lose it” permits.
    - Central government could charge taxes on undeveloped land to ensure timely project delivery.
  - Phase out rent controls:
    - Permanently exempt all new construction from controls to remove uncertainty.
    - Phase out existing controls (most impact in Stockholm), with vulnerable households protected through the housing allowance.
- Authorities’ views:
  - Authorities are concerned about rising house prices and provide subsidies targeted at boosting construction of smaller and affordable rental apartments.
  - Municipalities are legally responsible for key aspects of housing supply; central government needs municipal cooperation.
  - Political difficulty exists in addressing rent setting system due to strong support for current system and tenant tenure concerns.

### Macro and financial policy recommendations (Staff appraisal highlights)
- Growth and risks:
  - Growth has been bolstered to about 3 percent, yet inflation remains below the target.
  - Unemployment rates for the low-skilled and foreign-born are considerably higher than average; high migration inflows imply upward pressure on unemployment and have upfront fiscal costs.
  - Housing prices are rising rapidly from elevated levels, resulting in higher household debt and greater vulnerability to shocks.
- Monetary policy:
  - Monetary policy should remain firmly stimulatory until core inflation is durably close to target.
  - The Riksbank should be appropriately ready to do more if needed.
  - Intervention in the foreign exchange market should be a last resort given Sweden’s strong external position.
- Fiscal policy:
  - The broadly neutral fiscal stance is appropriate; migration expenses should be accommodated in the near term.
  - Mortgage interest deductibility should be phased out, which can be done over time with little risk of a hard landing in the housing market.
  - Housing supply should be enhanced through further subsidies for construction of affordable rental apartments in areas where job prospects are good and by increasing the limit for deferrals of capital gain taxes.
  - Implementing such a package in a fiscally neutral manner would support sustained growth while cooling housing prices gradually.
  - Moving over the medium term to maintaining a balanced central government budget over the cycle would be sufficient to safeguard Sweden’s fiscal buffers.
- Macroprudential and housing market measures:
  - Strengthen legal framework for macroprudential policies to enable timely action and adopt a DTI limit.
  - Complete the long process of adopting amortization regulations to cement changes in amortization culture.
  - The FSA’s legal mandate needs strengthening to give access to a range of macroprudential tools.
  - A DTI limit should be calibrated to affect few borrowers at the outset; a small portion of loans could exceed the threshold adopted following recent international practice.
- Labor market and migration:
  - Migration inflows reinforce the importance of reforms to broaden job creation and facilitate integration to ensure Sweden gains full benefits for long-term growth.
  - Improvements in the introduction program for refugees are welcome; further efforts to expedite processes are needed.
  - Social partners should ensure that entry-level wages are not a barrier for groups with high unemployment to gain jobs.
  - Strict employment protection for regular contracts should be reviewed to ensure exit costs do not deter firms from hiring new entrants with sufficient skills.
  - Training should be better aligned with employer needs and the effectiveness of public job matching services improved.
  - Expanding certain youth employment and training programs to newly arrived refugees would help them gain their first job and build skills.
- Administrative recommendation:
  - It is recommended to hold the next Article IV consultation with Sweden on the standard 12–month cycle.

### Risk Assessment Matrix (selected risks and policy responses)
- Euro area bond market contagion:
  - Overall level of concern: Medium.
  - Relative likelihood: Medium.
  - Impact if realized: Higher bank funding costs, higher lending interest rates, curtailed lending, weighing on growth; adverse impact partially mitigated by safe-haven flows.
  - Policy response: Reduce financial sector vulnerabilities, preserve fiscal buffers, provide liquidity support including in foreign currency using Sweden’s borrowed reserves and possible swap arrangements.
- Protracted weak growth in key advanced and emerging economies (including the Euro area and China):
  - Overall level of concern: Medium-High.
  - Relative likelihood: Medium.
  - Impact if realized: Exports and income decline, investment slows, inflation declines; sensitivity increased by high household debt and limited space for additional monetary easing.
  - Policy response: Provide additional monetary support, let automatic fiscal stabilizers operate fully, consider slower structural fiscal adjustment.
- Significant house price decline in Sweden:
  - Overall level of concern: Medium.
  - Relative likelihood: High.
  - Impact if realized: Large impact on consumption and employment, lower growth; loan quality impacted, primarily of firms serving domestic market; lending could be curtailed if doubts about covered bonds quality rise, elevating bank funding costs.
  - Policy response: Preventively reduce housing market vulnerabilities through macroprudential measures, phasing out tax incentives, and enhancing housing supply; in the event, provide monetary stimulus and funding support to banks.

*Source: IMF staff report content provided in the supplied document.*

### 4.  Significant decline in

### 4. Significant decline in inflation expectations leading inflation to persist below target in coming years.

### Risks to inflation and macroeconomic transmission
- Expectations have been anchored by inflation targets, but they weakened notably in late 2014.
- Wage negotiations starting in late 2015 heighten the potential for a lasting impact on inflation expectations.
- Slower growth in nominal incomes drags on demand via higher real debt burdens.
- Low inflation increases risk of deflation and impedes relative price adjustment.
- With interest rates already negative, the potential to cushion shocks is reduced.

### Policy response (recommended)
- Stronger monetary actions if core inflation does not rise as expected.
- Allow fiscal stabilizers to operate and consider stimulus if unemployment rises significantly.

### Monetary policy and inflation dynamics
- The Riksbank has cut the repo rate to -0.35 percent and extended the period for which low rates are projected.
- The Riksbank has introduced a QE program that has shifted the yield curve down, implying a narrower spread over German bund yields, associated with a weaker krona.
- Sweden’s inflation has picked up but remains below the Riksbank’s target, reflecting slack in the domestic economy exacerbated by falling oil prices, low euro area inflation, and past SEK appreciation.
- Inflation projections (from Table 1, HICP inflation, end-of-period):
  - 2015: 0.9
  - 2016: 1.9
  - 2017: 2.0
  - 2018: 2.3

### Growth, labor market, and output gap
- Output is recovering, supporting employment growth and narrowing the output gap.
- Key growth drivers: private consumption and residential investment; exports began to rise from 2014.
- Labor market indicators:
  - Unemployment rate (Table 1):
    - 2015: 7.5
    - 2016: 7.4
    - 2017: 7.3
    - 2018: 7.2
- Real GDP (Table 1, percent change):
  - 2015: 2.9
  - 2016: 3.0
  - 2017: 2.7
  - 2018: 2.4
- Output gap (Table 1, percent of potential):
  - 2015: -0.9
  - 2016: -0.1
  - 2017: 0.5
  - 2018: 0.8

### Financial market and exchange rate developments
- Interbank rates fell further and are below zero.
- Government bond yields and covered bond yields declined; sovereign bond yields tracked German rates more closely in 2015.
- Government bond spread and exchange rate dynamics: QE announcements coincided with a weaker krona and shifted yields down (figures show narrowed spreads over German bunds).
- Exchange rate behavior: the krona depreciated significantly against the USD and more slowly against the euro in recent years.

### Household balance sheet, housing, and household debt
- Housing price gains accelerated to a double-digit pace, especially for tenant-owned apartments.
- Household borrowing has picked up and borrowers increasingly opt for variable rate mortgages owing to very low interest rates.
- Household debt has risen to new highs relative to income, yet low rates are reducing interest payment burdens.
- Selected household debt indicators (Table 6):
  - Household debt as percent of GDP: 2014 = 82.1
  - Household debt as percent of disposable income: 2014 = 174.8
  - Household interest expense as percent of disposable income: 2014 = 3.2

### Public finances and external position (selected figures)
- General government gross debt (Table 1):
  - 2014: 44.9
  - 2015: 43.6
  - 2016: 42.3
  - 2017: 41.2
  - 2018: 39.5
- Net lending / borrowing (Table 1):
  - 2015: -0.9 (percent of GDP)
  - 2016: -0.9
  - 2017: -0.5
  - 2018: 0.0
- Current account balance (Table 4, percent of GDP):
  - 2015: 6.9
  - 2016: 6.8
  - 2017: 6.7
  - 2018: 6.4
- Net International Investment Position (Table 4, percent of GDP):
  - 2015: 2.6
  - 2016: 4.1
  - 2017: 5.5
  - 2018: 7.4

*International Monetary Fund staff analysis based on Sweden: selected indicators and figures.*

### Appendix I. Debt Sustainability Analysis

### Appendix I. Debt Sustainability Analysis

### Key debt and macroeconomic indicators (selected)
- Nominal gross public debt (percent of GDP): 2013: 40.6; 2014: 39.8; 2015: 44.9; 2016: 43.6; 2017: 42.3; 2018: 41.2; 2019: 39.5; 2020: 37.6; (projection) 35.4; 2010: 10 (note: series as presented).
- Public gross financing needs (percent of GDP): 2013: 11.3; 2014: 13.4; 2015: 12.2; 2016: 10.7; 2017: 9.0; 2018: 9.1; 2019: 8.1; 2020: 6.4; (projection) 6.7; Y CDS (bp): 36.
- Real GDP growth (percent): 2013: 2.0; 2014: 1.2; 2015: 2.3; 2016: 2.9; 2017: 3.0; 2018: 2.7; 2019: 2.4; 2020: 2.3; (projection) 2.1.
- Inflation (GDP deflator, percent): 2013: 1.7; 2014: 1.1; 2015: 1.6; 2016: 2.1; 2017: 1.9; 2018: 1.8; 2019: 2.2; 2020: 2.1; (projection) 2.0.
- Nominal GDP growth (percent): 2013: 3.7; 2014: 2.3; 2015: 3.9; 2016: 5.1; 2017: 4.9; 2018: 4.5; 2019: 4.7; 2020: 4.4; (projection) 4.2.
- Effective interest rate (percent): 2013: 3.3; 2014: 2.1; 2015: 1.9; 2016: 1.5; 2017: 1.9; 2018: 1.7; 2019: 1.9; 2020: 2.1; (projection) 2.9.
- Credit ratings (Foreign/Local): Moody's Aaa / Aaa; S&P's Aaa / AAA; Fitch AAA / AAA.

### Contribution to changes in public debt (cumulative and flows)
- Change in gross public sector debt (cumulative): 2013: -1.3; 2014: 2.6; 2015: 5.1; 2016: -1.3; 2017: -1.3; 2018: -1.0; 2019: -1.7; 2020: -2.0; projection: -2.2; cumulative: -9.5.
- Identified debt-creating flows (cumulative): 2013: -1.6; 2014: 1.1; 2015: 2.5; 2016: -0.6; 2017: -0.2; 2018: -0.5; 2019: -1.0; 2020: -1.3; projection: -1.5; cumulative: -5.1.
- Primary deficit (percent of GDP): 2013: -1.4; 2014: 1.3; 2015: 1.7; 2016: 1.0; 2017: 1.0; 2018: 0.6; 2019: 0.1; 2020: -0.4; projection: -1.0; cumulative: 1.3.
- Primary (noninterest) revenue and grants (percent of GDP): 2013: 50.8; 2014: 50.2; 2015: 49.3; 2016: 48.0; 2017: 48.2; 2018: 48.5; 2019: 48.7; 2020: 48.8; projection: 48.8; cumulative: 291.0.
- Primary (noninterest) expenditure (percent of GDP): 2013: 49.4; 2014: 51.5; 2015: 51.0; 2016: 48.9; 2017: 49.3; 2018: 49.1; 2019: 48.8; 2020: 48.4; projection: 47.8; cumulative: 292.3.

### Automatic debt dynamics and components
- Automatic debt dynamics (cumulative): 2013: -0.2; 2014: -0.1; 2015: 0.9; 2016: -1.5; 2017: -1.3; 2018: -1.2; 2019: -1.1; 2020: -0.9; projection: -0.5; cumulative: -6.4.
- Interest rate/growth differential (cumulative): 2013: -0.2; 2014: -0.1; 2015: -0.8; 2016: -1.5; 2017: -1.3; 2018: -1.2; 2019: -1.1; 2020: -0.9; projection: -0.5; cumulative: -6.4.
  - Of which: real interest rate (percent): 2013: 0.7; 2014: 0.4; 2015: 0.1; 2016: -0.3; 2017: 0.0; 2018: 0.0; 2019: -0.1; 2020: 0.0; projection: 0.3; cumulative: -0.2.
  - Of which: real GDP growth (percent): 2013: -0.9; 2014: -0.5; 2015: -0.9; 2016: -1.3; 2017: -1.2; 2018: -1.1; 2019: -1.0; 2020: -0.9; projection: -0.8; cumulative: -6.2.
- Exchange rate depreciation (cumulative): 2013: -0.1; 2014: -0.1; 2015: 1.7; 2016: ...; 2017: ...; 2018: ...; 2019: ...; 2020: ...; projection: ...... 
- Other identified debt-creating flows (percent of GDP): 0.0 for all years 2013–2020.
- Contingent liabilities: 0.0 for all years 2013–2020.
- Lending to the Riksbank: 0.0 for all years 2013–2020.
- Residual, including asset changes (cumulative): 2013: 0.3; 2014: 1.5; 2015: 2.5; 2016: -0.8; 2017: -1.1; 2018: -0.5; 2019: -0.7; 2020: -0.7; projection: -0.7; cumulative: -4.4.

### Baseline projections (selected variables)
- Baseline scenario real GDP growth (percent): 2015: 2.9; 2016: 3.0; 2017: 2.7; 2018: 2.4; 2019: 2.3; 2020: 2.1.
- Baseline scenario inflation (percent): 2015: 2.1; 2016: 1.9; 2017: 1.8; 2018: 2.2; 2019: 2.1; 2020: 2.0.
- Baseline scenario primary balance (percent of GDP): 2015: -1.0; 2016: -1.0; 2017: -0.6; 2018: -0.1; 2019: 0.4; 2020: 1.0.
- Baseline scenario effective interest rate (percent): 2015: 1.5; 2016: 1.9; 2017: 1.7; 2018: 1.9; 2019: 2.1; 2020: 2.9.

### Historical and alternative scenarios (high-level)
- Historical scenario (selected):
  - Real GDP growth (percent): 2015: 2.9; 2016: 1.7; 2017: 1.7; 2018: 1.7; 2019: 1.7; 2020: 1.7.
  - Inflation (percent): same as baseline 2015–2020.
  - Primary balance (percent of GDP): 2015: -1.0; 2016: 0.8; 2017: 0.8; 2018: 0.8; 2019: 0.8; 2020: 0.8.
  - Effective interest rate (percent): 2015: 1.5; 2016: 1.8; 2017: 1.8; 2018: 2.2; 2019: 2.4; 2020: 3.3.
- Constant Primary Balance Scenario (selected):
  - Real GDP growth (percent): same as baseline 2015–2020.
  - Inflation (percent): same as baseline 2015–2020.
  - Primary balance (percent of GDP): constant at -1.0 for 2015–2020.
  - Effective interest rate (percent): 2015: 1.5; 2016: 1.8; 2017: 1.6; 2018: 1.8; 2019: 2.0; 2020: 2.7.
- Contingent Liability Shock (selected):
  - Real GDP growth (percent): 2015: 2.9; 2016: -3.3; 2017: -3.6; 2018: 2.4; 2019: 2.3; 2020: 2.1.
  - Inflation (percent): 2015: 2.1; 2016: 0.3; 2017: 0.2; 2018: 2.2; 2019: 2.1; 2020: 2.0.
  - Primary balance (percent of GDP): 2015: -1.0; 2016: -21.9; 2017: -0.6; 2018: -0.1; 2019: 0.4; 2020: 1.0.
  - Effective interest rate (percent): 2015: 1.5; 2016: 2.0; 2017: 3.0; 2018: 2.5; 2019: 2.7; 2020: 3.3.

### Composition of public debt and financing needs (highlights)
- Gross Nominal Public Debt (percent of GDP) is shown by year for 2013–2020 (chart data presented).
- Public Gross Financing Needs (percent of GDP) displayed for 2013–2020 (chart data presented).
- By maturity (percent of GDP): series for medium and long-term versus short-term for 2004–2020 (projection).
- By currency (percent of GDP): local currency-denominated versus foreign currency-denominated for 2004–2020 (projection).

### Underlying assumptions and methodological notes
- Public sector is defined as general government. (Source: IMF staff.)
- Based on available data as of October 15, 2015.
- Sovereign spread metric: Long-term bond spread over German bonds.
- Effective interest rate defined as interest payments divided by debt stock (excluding guarantees) at the end of previous year.
- Automatic debt dynamics derived using formula in footnote 5: [(r - π(1+g) - g + ae(1+r)]/(1+g+π+gπ)) times previous period debt ratio, with r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency denominated debt; and e = nominal exchange rate depreciation (measured by increase in local currency value of U.S. dollar).
- Real interest rate contribution derived from numerator in footnote 5 as r - π (1+g) and real growth contribution as -g.
- Exchange rate contribution derived from numerator in footnote 5 as ae(1+r).
- Residual includes asset changes and interest revenues (if any). For projections, includes exchange rate changes during the projection period.
- Debt-stabilizing primary balance assumes key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the level of the last projection year.

*Source: IMF staff. Appendix I. Debt Sustainability Analysis — As of October 15, 2015.*

### 1996. Uses an SDDS flexibility option for

### _cr15329 - 1996. Uses an SDDS flexibility option for

### Data reporting and data quality
- The authorities completed the requirements for adherence to SDDS plus in 2015.
- A data ROSC was published in September 2001, followed by an update in November 2002.
- Timeliness flexibility: Uses an SDDS flexibility option for timeliness on the production index data category.
- Table of frequency and timeliness highlights (as of 29/10/15):
  - Exchange Rates: Current; Frequency of Data: D; Frequency of Reporting: D; Frequency of Publication: D.
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation 2015/09; Date received 2015/10; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M.
  - Reserve/Base Money: 2015/09; 2015/10; M; M; M.
  - Broad Money: 2015/09; 2015/10; M; M; M.
  - Central Bank Balance Sheet: 2015/09; 2015/10; M; M; M.
  - Consolidated Balance Sheet of the Banking System: 2015/09; 2015/10; M; M; M.
  - Interest Rates: Current; D; D; D.
  - Consumer Price Index: 2015/09; 2015/10; M; M; M.
  - Revenue, Expenditure, Balance and Composition of Financing – General Government: 2015/Q1; 2015/07; Q; Q; Q.
  - Revenue, Expenditure, Balance and Composition of Financing – Central Government: 2013; 2015/10; A; A; A.
  - Stocks of Central Government and Central Government-Guaranteed Debt: 2013; 2015/10; A; A; A.
  - External Current Account Balance: 2015 Q2; 2015/10; Q; Q; Q.
  - Exports and Imports of Goods and Services: 2015/09; 2015/10; M; M; M.
  - GDP: 2015 Q2; 2015/10; Q; Q; Q.
  - International Investment Position: 2015 Q2; 2015/10; Q; Q; Q.

### Recent macroeconomic development and outlook
- Sweden: economy performing well with solid private consumption and rising residential investment; service-led exports expected to push annual GDP growth to around 3 percent.
- Employment: steady growth rate over 1 percent for some time; unemployment started to decline and reached 7¼ percent in Q3.
- Inflation: low for some time but has started to rise following previous depreciation of the krona and supported by a highly expansionary monetary stance.
- Population and migration:
  - Population growth projected to reach 1¼ percent in 2015 and to remain high in the coming years.
  - The drastic uptick in asylum seekers in 2015 poses major challenges: reception and timely registration, housing, immediate medical needs, very high number of unaccompanied minors, and potential broad effects on public sector capacity.
  - Short-term: introduction programs and transfers to municipalities will boost public spending.

### Financial stability and macroprudential policy
- Authorities share IMF concern over rapid housing price increases associated with rising household indebtedness.
- Measures already introduced:
  - Loan-to-value limit.
  - Risk-weight floor for mortgages.
  - Ongoing work to introduce an amortization requirement.
- IMF recommendation to consider a debt-to-income limit is acknowledged as one among several possible tools.
- Need for supply-side housing reforms emphasized.
- Further actions if house prices and household debt continue to increase:
  - Introduction or tightening of macroprudential tools to address residential mortgage market imbalances.
  - Ongoing discussion on strengthening the FSA’s legal mandate to deploy a range of macroprudential tools.
  - The Riksbank believes implementation of further tools are urgently needed.
- Banking sector resilience:
  - Swedish banks have improved resilience to credit- and liquidity risks, but additional measures could be warranted.
  - FSA considers Swedish banks resilient towards credit losses; FSA reviewing risk weights on corporate loans to strengthen robustness of risk-based capital requirements.
  - The Riksbank believes capital buffers should be further increased.
- Resolution and cross-border issues:
  - In view of Nordea’s plans to change to a branch structure, regional and European cooperation on resolution arrangements needs enhancement.

### Monetary policy
- The Riksbank shares staff’s view of importance of returning inflation to target.
- Recent measures and stance:
  - Negative repo rate and purchases of government bonds.
  - October monetary policy meeting decision: extend government bond purchase program through mid-2016 and defer an initial increase of the repo rate until the first half of 2017.
  - High preparedness to make monetary policy more expansionary if inflation prospects deteriorate.
- Effects and risks:
  - Expansionary policy and weaker exchange rate have supported the recent rise in inflation; krona expected to slowly strengthen in coming years reducing exchange rate contribution to inflation.
  - Prolonged low interest rates pose risks: increased risk-taking and potential overvaluation of assets.
  - Assessment: negative interest rates have, so far, not impaired functionality of the financial system.
  - Monetary policy cannot address household indebtedness directly.
- Labor market and inflation expectations:
  - Riksbank communicates limited tolerance for low inflation and higher willingness to allow inflation to temporarily exceed its forecast without tightening.
  - Ensuring long-term inflation expectations remain anchored around the inflation target is primary concern ahead, including through the 2016 large-scale round of collective bargaining.

### Fiscal policy
- Ministry of Finance broadly agrees with IMF staff that a broadly neutral fiscal stance is appropriate in the near term.
- Net lending remains below the target level; public finances need strengthening.
- Resource utilization low and recovery outlook uncertain; fiscal policy should support recovery and help push down unemployment.
- Budget Bill for 2016: proposed reforms should be fully funded to strengthen net lending while safeguarding the recovery.
- Refugee-related measures:
  - Government presented a draft addendum to the budget because of the refugee situation proposing temporary support to local governments and civil society, financed by an increase in government borrowing.
  - Increased government borrowing used to manage unforeseen, short-term expenditures in the current budget year.
  - Government offices reviewing how future spending increases may be financed: decreased expenditures elsewhere, measures to curb cost increases, borrowing, or a combination.
- Short-run effects of immigration on public finances: initially positive effect on public expenditures and labor demand; over time, employment outcomes depend on effective integration policies.

### Structural issues and recommendations
- Labor market:
  - Sweden: high labor force participation and employment rates (highest in the EU) but unemployment remains high.
  - Government objective: reduce unemployment to be the lowest in the EU by 2020.
  - Budget Bill for 2016 includes investments in better job matching and skills development, active labor market policy for long-term unemployed and people with impairments.
  - Increased compensation to municipalities for reception of refugees and measures to introduce newly arrived immigrants to the labor market.
  - Staff recommendations:
    - Review employment protection law to ensure exit costs do not deter firms from hiring new entrants with sufficient skills.
    - Use temporary contracts as stepping stones for groups with uncertain productivity, while avoiding long-term entrapment in fixed-term employment; open-ended contracts should be the main rule.
    - Government working on a bill to reduce possibility of repeated fixed-term contracts and improve situation of workers at risk of prolonged fixed-term employment.
- Taxation:
  - Tax system design can influence household debt; any measures (e.g., tax deductibility on mortgage interest payments) must be considered in a long-term perspective and handled with care because of potential negative effects on growth and private consumption.
  - On deferral of capital gains tax when selling a house: one principle is to tax close to time of taxable income; a more generous threshold for deferral would run counter to this principle.
- Housing supply and regulation:
  - Government concurs with staff: housing supply must increase, competition strengthened, planning and appeal processes streamlined; changes take time.
  - Budget Bill for 2016 proposals:
    - Investment aid to rental housing and student housing.
    - Simplification of rules to streamline planning and construction; improved noise regulations.
    - Means allocated to municipalities to incentivize increased housing construction.
    - Two commissions of inquiry reviewing competition in construction sector and how tenants' position could be strengthened.
  - Rent-setting:
    - Re-regulation of Municipal Housing Companies effective from 1 January 2011; special rules for new rental housing extended exemption period from 10 to 15 years from 1 February 2013.
    - Strong support for present rent setting system to ensure “fair rents” and security of tenure.
  - Public infrastructure investments:
    - Government presented a program with substantial long-term investments in housing, public transport, and railways.
    - Special committee set up to enable rapid construction of high speed railways between major cities and related infrastructure.

*Statement by Mr. Thomas Östros, Alternate Executive Director for Sweden and Mr. Paavo Miettinen, Advisor to the Executive Director, November 30, 2015*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2015/_cr15329.pdf_