If Sweden is to emerge stronger from the crisis, confidence in the future and the right reforms are eneeded. Future competitiveness requires a better investment climate.
Close to 40 percent of companies in Sweden have reduced investment in the past six months and the second half of the year is forecast to be even weaker for investment. Fewer than four out of ten people of working age in Sweden are in work – the lowest level for more than 20 years. The speed at which company investment restarts will be decisive in how rapidly Sweden recovers from recession. If Sweden is to emerge stronger from the crisis, confidence in the future and the right reforms ar eneeded.
The Covid-19 crisis has receded into recession. But the situation for many companies is bleak. Between and within sectors there are starkly contrasting realities. While some companies are experiencing a surge in demand, especially related to digitalisation and e-commerce, others remain in deep crisis and are dependent upon decisions linked to Covid restrictions and whether society can re-open safely. Structural change and digitalisation have been broadly accelerated by the crisis, but these trends have been undermined by uncertainty over the future and reduced investment.
Global conditions have a substantial impact on business confidence in Sweden. The international downturn creates significant uncertainty for a trade-dependent country such as Sweden. In 2020, the Swedish economy is set to contract by 4.4 per cent, before growing by 3.2 per cent in 2021, and by 3.0 per cent in 2022. Growth lost due to the crisis is not expected to be recovered until the second quarter of 2022. This is several quarters earlier than previous assessments made before the summer and this is primarily due to the contraction at the height of the crisis not being as deep as many analysts feared. Unemployment is not expected to fall back to either pre-crisis levels or its equilibrium level during the forecast horizon (2022).
A flourishing investment climate that promotes private investment is vital to the restart of the Swedish economy. Sweden should be a leading knowledge economy that attracts investment and talent, accelerates digitalisation, develops more sustainable solutions, and exports environmental benefit. Investment made here and now will accelerate recovery in the short term and build the foundations for Sweden’s long-term competitiveness. Through productivity-boosting investment, Swedish companies can improve their international competitiveness beyond the crisis.