In 2020, Sweden's GDP is projected to shrink 6.1 percent, according to a forecast by the Confederation of Swedish Enterprise.
“The situation puts enormous pressure on our companies and their operations”, chief economist Bettina Kashefi said in statement.
Despite “bright spots existing both in Sweden and abroad”, the Confederation of Swedish Enterprise forecasted a so-called V-scenario, in which the fall will be followed by a 3.4 percent rebound. However, it will take Sweden until late 2022 before its growth fully recovers, it said.
“Of course, this is based on the idea that spread of the virus does not increase further and that regional outbreaks can be suppressed to gain control of the spread and thus prevent new extensive closures of operations,” Kashefi said.
The companies are also pessimistic. Their assessment of developments in the coming six months is down to roughly the same levels as during the 2008 financial crisis, according to the forecast.
“We expect a deeper downturn than before and the upturn is weaker and more protracted compared to the 2008 financial crisis,” Bettina Kashefi said.
By her own admission, Kashefi saw worrying developments in the labour market ahead. According to her, furloughs and layoffs will continue to rise during the fall.
According to the forecast, unemployment will rise almost 12 percent in the coming years (up from 7.1 in March 2020), and then slowly fall back. Half of those who are currently furloughed may end up unemployed. Kashefi found these numbers worrying.
“The situation in the labour market is alarming. It will be toughest for those who are far from the labour market, such as young people and foreign-born, and we risk many more getting stuck in long-term unemployment”, Kashefi said. “The more people who lose their jobs and the higher the unemployment rate, the harder and more costly it will be to push unemployment back,” she said.
The Confederation of Swedish Enterprise said that the situation in most industries remains difficult. The uncertainty is great about how many companies and jobs can be saved.
“Many companies are struggling with declining sales and revenue loss. We also see that the number of bankruptcies and restructurings has increased during the year,” Kashefi said, stressing that it puts “enormous pressure” on companies and their operations.
The solution, according to Kashefi, is to leave no stone unturned in preventing unnecessary bankruptcies and the closure of companies.
“The more companies survive, the faster the recovery goes,” she concluded.
Earlier this spring, the Swedish Finance Ministry also envisioned a V-shaped development, with a milder 4.2 percent fall in 2020 followed by 3.3 percent rise in 2021.
With its outlier no-lockdown strategy and almost no mandatory restrictions, Sweden's COVID-19 death toll, nearing 5,000, is by far the highest in Scandinavia.
