## IMF Executive Board Concludes 2021 Article IV Consultation with Sweden

_IMF News, March 25, 2021_

## Source details

**Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Sweden](https://www.imf.org/en/news/articles/2021/03/24/pr2180-sweden-imf-executive-board-concludes-2021-article-iv-consultation-with-sweden)

## Other formats

- [Markdown version](/en/news/articles/2021/03/24/pr2180-sweden-imf-executive-board-concludes-2021-article-iv-consultation-with-sweden/index.md)
- [Structured JSON version](/en/news/articles/2021/03/24/pr2180-sweden-imf-executive-board-concludes-2021-article-iv-consultation-with-sweden/index.json)
- [Bundle manifest](/en/news/articles/2021/03/24/pr2180-sweden-imf-executive-board-concludes-2021-article-iv-consultation-with-sweden/bundle-manifest.json)

## Bibliographic details
- Published: March 25, 2021

---

### Economic impact and near-term outlook
- 2020 output is estimated to have fallen by about 3 percent.
- Sweden’s Covid-19 infection and mortality rates have been somewhat above the EU average but much higher than in its Nordic peers.
- Sweden is projected to grow at about 2 percent in 2021, but uncertainties have increased recently regarding the new strains for the virus and the rollout of vaccination.
- The external current account surplus widened on the back of compressed imports and buoyant exports.
- The fiscal response shifted from small surpluses in past years to a deficit of about 4 percent of GDP in 2020.
- Inflation hovered around 1 percent in 2020; its medium-term projection is slightly below the 2 percent target.
- Unemployment increased sharply, with temporary workers, the youth, and foreign-born suffering disproportionately.

### Executive Board assessment — key findings
- Sweden fared the crisis better than many European neighbors due to substantial buffers and generally strong fundamentals.
- The authorities’ large support package was timely and adequate, providing ample support to households and businesses, averting a financial crisis, and stabilizing markets.
- The 2020 fall in output is projected at around 3 percent, which is less than the EU average.
- The increase in unemployment—especially of the young and foreign-born—was larger than in countries that suffered a deeper recession.
- It was appropriate that most of the crisis measures were extended to June 2021 given heightened uncertainties.

### Fiscal policy recommendations
- Fiscal policy should continue to support the economy and lead the recovery.
- It is important to not prematurely return to the surplus target.
- The eventual withdrawal of support measures should be cautiously gradual to minimize scarring as the recovery takes hold.
- There is room for increasing public expenditure over the medium term to enhance growth and achieve Sweden’s green and inclusion objectives.
- Review the design of support measures to facilitate structural transformation; in particular:
  - Redesign the short-term work scheme to make it more flexible and more supportive for temporary workers and to incentivize retraining and hiring.

### Monetary policy, central banking, and financial stability
- Monetary policy has been accommodative, with ample liquidity provision, a large asset purchase program, and a reduction of the Riksbank overnight lending rate.
- Forward guidance suggests the policy (repo) rate will likely remain at the same level over the medium term (following its increase to zero effective January 2020).
- The monetary policy stance has been appropriate; the expansion of the Riksbank’s asset purchase program contributed importantly to supporting the economy and stabilizing key markets.
- As liquidity constraints seem to have been alleviated, the policy mix should focus on fiscal support, while the Riksbank should stand ready to complement fiscal measures as needed.
- Any amendments to the Riksbank law should preserve its operational independence and ability to quickly deploy a broad range of instruments in future crises.
- The e-krona pilot project will help design a central bank currency proposal to maximize benefits while minimizing risks, including for financial intermediation and cybercrime.
- Amendments to the anti-money laundering framework and its enforcement are welcome.

### Financial vulnerabilities and monitoring
- Banks’ exposures to the CRE sector and high household debt call for better data collection to enhance monitoring and guide possible further strengthening of prudential regulations, especially for CRE.
- A prolonged recession, and accelerated shifts to e-commerce, teleworking, and less travel, could result in dwindling revenue streams for CRE companies with high exposure to affected sectors.
- Close monitoring of corporate vulnerabilities and bond markets is necessary to preserve financial stability.

### Structural challenges and housing market recommendations
- Imperative to address long-term structural challenges: limited employment prospects for the foreign-born and youth, shortages in affordable housing, and demographic shifts.
- The 2021 Budget Bill contained higher spending on training and education, lower social security contributions for the youth, and initiatives geared towards the foreign-born, especially women.
- A further reduction of the high labor tax wedge is desirable.
- The overly regulated rental market, with its long queues, favors existing tenants; introduce a simpler market-based system complemented with adequate housing allowances.
- Streamline complex local regulations to help increase supply and competition in the construction sector, driving down costs.
- Comprehensive reforms, including gradually increasing property taxes from their extremely low level, would make the housing market more dynamic, improve efficiency and equity, and facilitate labor mobility.

### Selected economic indicators (2018–26)
- Real GDP (percent change)
  - 2018: 2.0
  - 2019: 1.4
  - 2020: -2.8
  - 2021 (projection): 3.3
  - 2022 (projection): 2.9
  - 2023 (projection): 2.4
  - 2024 (projection): 2.1
- Domestic demand (percent change)
  - 2018: 1.7
  - 2019: -0.3
  - 2020: -3.0
  - 2021 (projection): 3.0
  - 2022 (projection): 2.8
  - 2023 (projection): 2.3
- Private consumption (percent change)
  - 2018: 1.8
  - 2019: 1.2
  - 2020: -4.7
  - 2021 (projection): 3.2
  - 2022 (projection): 2.2
- Public consumption (percent change)
  - 2018: 0.8
  - 2019: 0.3
  - 2020: -0.5
  - 2021 (projection): 2.7
  - 2022 (projection): 1.5
  - 2023 (projection): 1.3
  - 2024 (projection): 1.0
- Gross fixed investment (percent change)
  - 2018: -3.1
  - 2019: 0.6
  - 2020: 3.5
  - 2021 (projection): 3.1
- Net exports (contribution to growth)
  - 2018: 0.0
  - 2019: 0.4
  - 2020: 0.1
  - 2021 (projection): -0.2
- Exports of G&S (percent change)
  - 2018: 4.2
  - 2019: 4.8
  - 2020: -5.2
  - 2021 (projection): 5.4
  - 2022 (projection): 4.1
- Imports of G&S (percent change)
  - 2018: 3.8
  - 2019: -5.8
  - 2020: 4.9
  - 2021 (projection): 3.4
- HICP inflation (e.o.p)
  - 2018: 0.7
  - 2019: 1.6
  - 2020: 1.9
- Unemployment rate (percent)
  - 2018: 6.3
  - 2019: 6.8
  - 2020: 8.3
  - 2021 (projection): 8.7
  - 2022 (projection): 8.4
  - 2023 (projection): 7.7
  - 2024 (projection): 7.2
- Gross national saving (percent of GDP)
  - 2018: 28.6
  - 2019: 29.8
  - 2020: 29.7
  - 2021 (projection): 30.0
  - 2022 (projection): 30.4
  - 2023 (projection): 30.5
  - 2024 (projection): 30.7
  - 2025 (projection): 30.8
- Gross domestic investment (percent of GDP)
  - 2018: 26.0
  - 2019: 24.7
  - 2020: 24.5
  - 2021 (projection): 25.2
  - 2022 (projection): 25.7
  - 2023 (projection): 26.5
  - 2024 (projection): 27.1
  - 2025 (projection): 27.4
  - 2026 (projection): 27.8
- Output gap (percent of potential)
  - 2018: 2.5
  - 2019: -1.1
  - 2020: -0.8
  - 2021 (projection): -0.6
  - 2022 (projection): -0.4
- Public finance (percent of GDP)
  - Total revenues
    - 2018: 49.6
    - 2019: 48.8
    - 2020: 49.1
    - 2021 (projection): 48.4
    - 2022 (projection): 49.2
    - 2023 (projection): 49.3
    - 2024 (projection): 49.4
  - Total expenditures
    - 2018: 48.3
    - 2019: 53.1
    - 2020: 52.2
    - 2021 (projection): 50.6
    - 2022 (projection): 49.0
  - Net lending
    - 2018: 0.5
    - 2019: -4.0
    - 2020: -3.9
    - 2021 (projection): -1.8
  - Structural balance (as a percent of potential GDP)
    - 2018: -3.5
    - 2019: -1.5
    - 2020: 0.2
  - General government gross debt, official statistics
    - 2018: 38.9
    - 2019: 35.1
    - 2020: 38.5
    - 2021 (projection): 40.7
    - 2022 (projection): 39.3
    - 2023 (projection): 37.8
    - 2024 (projection): 36.1
    - 2025 (projection): 34.4
- Money and credit (year-on-year, percent change, eop)
  - M3 1/
    - 2018: 5.9
    - 2019: 7.9
    - 2020: 17.8
  - Bank lending to households
    - 2018: 5.3
    - 2019: 5.0
    - 2020: 5.5
- Interest rates (percent, end of period)
  - Repo rate: -0.25
- Balance of payments (percent of GDP)
  - Current account
    - 2018: 2.6
    - 2019: 4.6
    - 2020: 4.5
    - 2021 (projection): 4.3
    - 2022 (projection): 3.9
  - Foreign direct investment, net
    - 2018: 1.1
- International reserves, changes (in billions of US dollars)
  - 2018: -6.6
- Net international investment position
  - 2018: 8.6
  - 2019: 18.4
  - 2020: 23.3
  - 2021 (projection): 27.7
  - 2022 (projection): 32.0
  - 2023 (projection): 35.8
  - 2024 (projection): 39.2
  - 2025 (projection): 42.4
  - 2026 (projection): 45.4
- Exchange rate (period average)
  - SEK per euro
    - 2018: 10.3
    - 2019: 10.5
    - 2020: 10.2
  - SEK per U.S. dollar
    - 2018: 9.5
- Nominal effective rate (2010=100)
  - 2018: 92.8
  - 2019: 89.2
  - 2020: 90.8
- Real effective rate (2010=100) 1/
  - 2018: 93.4
  - 2019: 88.7
  - 2020: 93.5
- Other indicators
  - GDP per capita (2019, USD): 51,434
  - Population (2019, million): 10.3
  - Key export markets: Germany, Norway, United Kingdom

*Press Release No. 21/80 — IMF Executive Board Concludes 2021 Article IV Consultation with Sweden*

---


## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Sweden and the IMF](http://www.imf.org/external/country/SWE/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/03/24/pr2180-sweden-imf-executive-board-concludes-2021-article-iv-consultation-with-sweden_