The Swedish economy: a snapshot 15 October, 2018 Joakim Sonnegrd - - PowerPoint PPT Presentation

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The Swedish economy: a snapshot 15 October, 2018 Joakim Sonnegrd - - PowerPoint PPT Presentation

Mar 05, 2024 352 likes •574 views

The Swedish economy: a snapshot 15 October, 2018 Joakim Sonnegrd and Niklas Frank 1 Sweden during the Financial Crisis Despite a 5% drop in GDP in 2009 and a typically high fiscal balance elasticity, Sweden: Moderate drop in the

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The Swedish economy: a snapshot

15 October, 2018 Joakim Sonnegård and Niklas Frank

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Sweden during the Financial Crisis

▪ Despite a 5% drop in GDP in 2009 and a typically high fiscal balance elasticity, Sweden:

➢ Moderate drop in the fiscal balance; ➢ Recovered to pre-crisis GDP in 2010.

▪ Very different from the crisis in the early 1990s: ▪ Key explanations for Sweden’s good performance:

➢ Important reforms were undertaken during the 1990s; ➢ No structural imbalances – no domestic amplification mechanisms; ➢ Strong budget before the crisis; ➢ A strong Finance Minister supported by a politically well-established fiscal framework.

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Growth and Unemployment 1970–2017

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2 4 6 8 10 12

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2 4 6 8 10 12 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 GDP growth (OECD) GDP growth (Sweden) Unemployment rate (OECD) Unemployment rate (Sweden) Percent of GDP

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General Government Net Lending 1970–2017

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2 4 6

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2 4 6 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Percent of GDP Net lending Average, 2000-2017

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General Government Gross and Net Debt 1970–2017

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20 40 60 80 100

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20 40 60 80 100 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Percent of GDP General Government Gross Financial Liabilities, as A Percentage of GDP General Government Net Financial Liabilities, as A Percentage of GDP

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Public finances 2017

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50 100 150 200 250 50 100 150 200 250 Estonia Luxe… Bulgaria Czech… Roma… Denm… Lithua… Latvia Sweden Poland Malta Slovakia Nethe… Finland Germ… Ireland Hungary Slovenia Croatia Austria EU United… Euro.… France Cyprus Spain Belgium United… Portugal Italy Greece Japan Gross public debt

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2 4

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2 4 6 Malta Cyprus Czech Republic Luxembourg Sweden Germany Netherlands Denmark Bulgaria Greece Croatia Lithuania Slovenia Estonia Ireland Latvia Finland Austria Euro Area EU Belgium Slovakia Poland United… Hungary Italy France Romania Portugal Spain Japan United States % of GDP General government net lending

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A Comprehensive Makeover during the 1990s

▪ EU membership in 1995; ▪ Election periods extended to 4 years; ▪ A new tax system; ▪ A new monetary-policy framework; ▪ Tough fiscal consolidation (1993-1998, ~ 11% of GDP); ▪ A new fiscal framework; ▪ A new contributions-defined pension system; ▪ Reforms of wage bargaining; ▪ Deregulations of product and service markets; ▪ General labour market reforms (until 2010).

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Labour participation rate and employment rate

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Sweden: highest employment rate in EU…

Källa: Eurostat.

40 45 50 55 60 65 70 40 45 50 55 60 65 70 Estland Sverige Tyskland Nederländerna Storbritannien Danmark Österrike Tjeckien Litauen Lettland Irland Slovenien Finland Portugal Luxemburg EU-28 Ungern Slovakien Cypern Polen Malta Rumänien Bulgarien Frankrike Belgien Spanien Kroatien Italien Grekland Procent av befolkningen

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High employment rate in an international perspective (20-64 år, 2017)

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Källa: Eurostat

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Emplyment rate: orgin and sex

Källa: SCB (AKU).

50 55 60 65 70 75 80 85 90 95 100 50 55 60 65 70 75 80 85 90 95 100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Procent av befolkningen, 25-54 år Kvinnor Utrikes Män Utrikes Kvinnor Inrikes Män Inrikes

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Housing prices (HOX Sweden) [2]

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50 100 150 200 250 300 50 100 150 200 250 300 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Index, Jan -05 = 100

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Household sector debt 1995-2017

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10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Share of GDP, per cent

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The Swedish Fiscal Framework

▪ A top-down approach for the adoption of the budget in the Parliament; ▪ Central government expenditure ceiling set 3 years in advance; decision by Parliament; ▪ A fiscal surplus target for general government net lending of 1%

  • f GDP, on average, over the business-cycle. From 2019 the

target is 1/3 % of GDP; ▪ From 2019 a “debt-anchor”: Maastricht debt amounts to 35 per cent of GDP. ▪ Balanced budget requirement for local governments;

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The Swedish Fiscal Framework

▪ SGP + “Six-pack”; ▪ Not member of the EURO, but has ratified the Fiscal Compact; ▪ Since 2007, a Fiscal Policy Council with a broad remit (to facilitate transparency and accountability); ▪ Note: The strength of this framework depends on the political will to respect it…

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THE END

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Extra material on the Council

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The set-up of the Fiscal Policy Council

▪ Established in 2007; ▪ An agency under the Government; ▪ Six members:

➢ Academics; ➢ Policy-making experience;

▪ Supplementary activities to ordinary jobs (mainly academic positions); ▪ Small secretariat: five persons; ▪ Annual budget 1 000 000 €; ▪ Provisions to safeguard the Council’s independence, such as a stipulation that the Council itself proposes its members to the Government.

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THE RIKSDAG (Parliament)

349 members

GOVERNMENT

24 Ministers

The Committee

  • n Finance

17 members The Swedish National Financial Management Authority 160 employees The National Institute for Economic Research 60 employees The Swedish National Audit Office 300 employees The agency 5 employees

Ministry

  • f Finance

470 employees The Council 6 members Chairman: Harry Flam The Riksbank (Central Bank) 400 employees Swedish Fiscal Policy Council

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The tasks of the Fiscal Policy Council

1. Focus on ex post evaluation, with some ex ante evaluation; 2. Evaluate whether the fiscal policy meets its objectives:

➢ Long-run sustainability; ➢ Surplus target; ➢ The expenditure ceiling; ➢ Stabilization issues.

3. Evaluate whether the developments are in line with healthy sustainable growth and a sustainable high employment; 4. Monitor the transparency of the government budget proposals and the motivations for various policy measures; 5. Analyse the effects of fiscal policy on the distribution of welfare; 6. Contribute to a better economic policy discussion in general.

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Has the fiscal policy framework worked?

▪ Generally successful implementation:

➢ Top-down approach is followed; ➢ Spending ceilings have not been breached (albeit some minor, and politically costly, examples of creative bookkeeping); ➢ Surplus target has not been met…0,4% on average; ➢ Broad political support: opposition wanted more spending during crisis, but less than 1% of GDP; ➢ The Fiscal Policy Council has increased the transparency and facilitated a higher quality of the political discussion.

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