Response to interpellation 2024/25:239 on the government's forecasts for the Swedish economy

Finansministern Elisabeth Svantesson (M)

Madam Speaker! Mikael Damberg has asked me whether the government has been too optimistic in its forecasts for the Swedish economy in light of the developments in German industry. He has also asked me how I and the government will reduce the risk of the global situation having major effects for Swedish companies and Swedish jobs.

Sweden is in a recession. High inflation and high interest rates have left their mark on both Sweden's and the euro area's economies. Household consumption and investments have developed weakly, and Swedish GDP has stagnated since the end of 2021. At the same time, unemployment has increased. Inflation has come down below the inflation target, but there are still challenges.

Such a challenge is the situation in German industry, which is of great importance for our exports. Germany is unfortunately struggling not only with cyclical problems but also with structural problems. In the short term, no improvement is visible in the industrial cycle, as evidenced by indicators such as the purchasing managers' index. On the other hand, interest rates are expected to continue falling, which is judged to support the industry moving forward.

The German industry is also struggling with challenges of a more structural nature, such as record-high energy prices and tough competition from China in the automotive industry. In addition to this, geo-economic uncertainty has increased, with threats of trade wars, while there is a government crisis.

Germany is our largest trading partner, and our exports there have decreased. The situation in the Swedish economy remains uncertain. In the Ministry of Finance's forecast update in December 2024, GDP growth was revised down slightly compared to the forecast in the budget bill for 2025. This is due to lower domestic demand and a more uncertain world with increased geo-economic uncertainty.

A major difference between Sweden and several of the Eurozone countries that are now under severe pressure is, however, that Sweden has strong public finances. This gives us room to maneuver to act if the economy deteriorates significantly. That possibility is limited for all those countries that already have record-high deficits and debts.

The government has, in the budget bill for 2025, supported households and simultaneously implemented important structural reforms so that Sweden will be well-positioned to meet the challenges of the future. That is how we build Sweden both wealthier and safer.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Mikael Damberg (S)

Madam Speaker! I thank the Minister for Finance for the answer.

The background to this interpellation is that we see that European industry and economic development, not least in large countries such as Germany and France, have slowed down much more than the Ministry of Finance and many economic analysts had expected. This has already had an effect on the Swedish economy. We see many pressured subcontractors today – the order books do not look as one had expected. We see a very great uncertainty, not least when it comes to Germany's economic and political future. This casts a damp blanket over the future plans of Swedish industry.

A particularly vulnerable sector is the automotive industry, which is a very important part of Swedish industry and an engine for technological development, research, investments, and very many jobs all around Sweden.

This is the background as to why I wanted to discuss the industry and the economic situation we have in Europe. I will return to that.

My first question in the interpellation, however, was a bit more direct regarding the Ministry of Finance's forecasts and whether the Minister for Finance was over-optimistic in his forecasts for the economy and the path forward. After having listened to the Minister for Finance's answer to the interpellation, I would like to say that the simple answer to my question is yes. It really has not gone as expected in the forecasts that were made for the Swedish economy.

We Social Democrats have criticized the government for being too passive regarding the financing of welfare and household finances. I mean that some of the downward forecast revisions that the government has been forced to engage in, regarding both unemployment and growth, have to do with how consumption in society has developed. I have criticized that the government has directed its fiscal stimuli to the wrong groups. Too much of the tax cuts have gone to the people who have the highest incomes instead of landing in the wallets of ordinary wage earners and households who actually could have used this money in a more constructive way by consuming and thereby contributing to pulling the economy further upwards.

We have been in a recession. The government has constantly spoken about seeing the light at the end of the tunnel and that it would soon turn upwards. It is understandable that the government chose to take some measures - they believed it would only be a small hiccup in the growth curve. At that time, it probably didn't matter that they withdrew the investment support for the housing sector and contributed even more to the housing crisis we have in Sweden. At that time, perhaps it was not so important to secure the state grants to municipalities and regions in the crisis, even though we know that the multiplier effect when it comes to welfare consumption is very high - it is one of the most effective measures that can be taken in a recession to ensure that the economy does not deteriorate further.

That is why I asked if the Minister for Finance admits that mistakes were made in the forecasts. Then, Madam Speaker, perhaps there could have been an element of self-criticism regarding having been wrong in the forecast assessment and thus landing on the wrong economic choices.

I want to use my last 30 seconds to go back to the industry. If I interpret the Finance Minister correctly, we agree on the description of both the world, the uncertainty factors that exist, and how the economy is developing.

I wonder if there are any examples of measures here and now that the government is prepared to take to support Swedish industry, create more confidence in the future and ensure that the industry can maintain the rather strong economic development of recent years, so that it does not also go into reverse for Swedish industry, because I believe that could have major effects on the Swedish economy moving forward.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Finansministern Elisabeth Svantesson (M)

Madam Speaker! I thank you for the interpellation. It is pleasant to meet here and speak about a subject that is difficult and very important, namely assessments of the economy.

I know that Mikael Damberg, as former Minister for Finance, knows that this is something that one, so to speak, does not take lightly. There is great competence all around in our agencies and at the Ministry of Finance, where they are currently working feverishly to constantly calibrate and produce the best forecasts that are possible.

Let me stop there. It might get a bit technical now, but I will spend a minute on this. A forecast is about figures, that is to say that one makes an assessment of the labor market situation, growth and much more, but a forecast is also about the uncertainty and how large one assesses it to be.

Regarding that part, which I have mentioned at every press conference I have had, one can observe that the uncertainty is only becoming greater and greater. It is not only us in Sweden who see this, but it really is so. It has been a long time since it was so complex to make forecasts, for several reasons that I want to mention.

The first is the high-inflation environment. Now we are leaving an environment that we have not had for 30 years, and households do not react in exactly the same way today as they did back then. I met the IMF today at the Ministry of Finance, and everyone is now struggling with how consumption will develop in different countries. That was the first.

The second thing is that it is multifaceted. We have a war in our immediate vicinity, energy systems that do not function as they should, and so on. This also means that the uncertainties are great.

The third thing that can be added is the political uncertainty in many countries, which Mikael Damberg touched upon. It is not just about structural problems, for example in Germany and their economy, but also about governmental challenges. Now that we need France and Germany the most, we hope that they can reach a stable political consensus as soon as possible. That would be good for all of Europe.

It is of course not easy to make forecasts, but I would say that we in Sweden have skilled forecasters. I do not know if there is anyone who hits exactly right at some point, but my assessment is that our Swedish forecasts are in line with many others.

Then one has to constantly revise the forecasts based on the outcome, because one does not know exactly how, for example, Swedish households react to interest rate cuts or tax cuts. We will have to see that here during the year. Furthermore, it is, of course, about what will happen in the German economy.

There are two rather large variables. We currently have a domestic recession due to high debt levels and high interest rates. We still look at it optimistically. Then we have an uncertainty in Europe - in Germany and in many other places.

I do not know if anyone has asked about it, but the budget that we have presented is well-balanced given the situation we are currently in. We have a strong margin to do more if needed. A spring bill and a spring budget will come a bit further ahead, and we are, of course, following the developments closely.

It is nevertheless pleasing that the public finances are strong, a view that I know we share, and there is an opportunity to do more if that is required.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Mikael Damberg (S)

Madam Speaker! I want to emphasize that I am fully aware that the Minister for Finance does not personally sit and sketch out every single forecast in the budget, but that it is highly competent officials who attempt to analyze the situation, look ahead, and seek help from other expert bodies and forecasters to land as accurately as possible.

As the Minister for Finance is clear about and as the Ministry of Finance has emphasized, there has been more uncertainty than usual in the latest forecasts, and it is more difficult to make forecasts in a new situation. Then the political responsibility lands once again on the Ministry of Finance. Have the correct calibrations been made in the political proposals and the "well-balanced" budget that has been placed on the Riksdag's table and voted through?

If one simply takes a forecast and looks back a bit in time at how household consumption has developed, one can see that the Ministry of Finance has revised down household consumption by 150 billion kronor over two years. That is quite a lot.

Then one must ask the question: Is there anything in the economic policy that could have been done differently to give households security and create more predictability so that, above all, the households that we know consume more could have started their consumption? This is just one example of questions that we have discussed with the government for a long time. We are the only country in the Nordic region that has not done anything regarding the child allowance during the cost crisis.

Through budget prioritizations where taxes are lowered significantly for those with high incomes, one does not get the same effect on consumption. This is my assessment, and I believe most economists agree on it. There may be other positive effects that the government wants to see, but if one wants to take Sweden out of a recession, there are other, more effective measures to take.

It was that kind of self-criticism that I was looking for a bit, and whether it exists in the Finance Minister now, when one has been forced into a lot of downward revisions and Sweden will emerge from the recession poorer than we would have needed to. Above all, the recession became much more prolonged than the Finance Minister and the Ministry of Finance had accounted for from the beginning. Now there has been a lot of discussion about this, which is a rather political issue. It is easy for the debate to just land on the question of what the budgets look like.

The second question is more about the industry. I heard the Finance Minister describe the problems and the uncertainty factors for the industry. We know that Sweden fundamentally has a relatively strong and very innovative industry, but it now faces a world that is quite turbulent and has great challenges.

Then I want to ask: Are there any additional measures that the Minister for Finance envisions need to be taken in this situation? Does attention need to be directed towards ensuring that Swedish export industry is not hit harder than necessary by the economic situation?

The speech at riksdagen.se, in Swedish (opens in a new tab)

Finansministern Elisabeth Svantesson (M)

Madam Speaker! I thank you for several wise insights.

We can start with growth, which I know we both consider important in both the short and long term. For us, it is of course about ensuring that the economy gets started as quickly as possible. Just as I said earlier, we do not know exactly how consumers in Sweden or other countries react. Obviously, people consumed in the beginning, and it took some time before they held back. Now it is somewhat the opposite.

Since we have not done this, and it has not been this way for 30 years, we do not know exactly how today's consumers will react. So far, many forecasts have been close to the outcome, so I feel confident about that. But again: the uncertainty has never been this great, at least not for a very long time, and that is also part of the forecasts.

In the longer term, it is about getting growth started, and that is perhaps most important of all. What we are doing and have done in our three budgets is about getting the economy started, supporting households and lowering taxes for everyone, which we have done for two years in a row, but also about doing what is long-term important for increased growth. As we know, this involves marginal taxes, infrastructure, education, energy systems and much more. One can, therefore, do two things at the same time.

I will honestly say that we fundamentally have quite similar budgets but also slightly different focuses when it comes to support for households. Do I think the Social Democrats' budget would have made a big difference for the outcome in the forecast? No, I don't think so. I see that the measures we have now made are well-balanced and important in both the short and long term. That is where the learned - in this case, the two of us - will disagree, but that is exactly as it should be.

I see that what we are doing now is of great benefit to people. It supports them. It will make the economy turn around in Sweden, and it will also strengthen the long-term growth, which I have very much in mind.

I will say something brief about the industry, where the focus has really been brutally present during these years. Some parts of Swedish industry that export have done very well. Some sectors or parts of the world have not been as affected by what has happened in recent years, while others are having a very tough time.

Above all, as Mikael Damberg says, many are now worried about what is happening in Germany and other parts of Europe. We naturally have close conversations, and we know that Swedish companies in many ways are very competitive. They call for more regulatory simplification in the EU, they call for a well-functioning energy system, and they call for competence supply and that it should continue to be possible to bring in, for example, people who are highly qualified. Here we work closely and do everything we can to assist in different ways.

We all have one and the same goal. I am completely convinced that we in this Riksdag want it to go well for Swedish companies and that Swedish jobs should become more and not fewer. There is therefore much to do, and we are also doing much precisely to simplify and improve for the companies that it now concerns.

When it concerns Donald Trump and trade barriers, for example, I have pointed out many times over the last few months that it is of course bad for Swedish companies and all other companies if the tariffs are raised. But it is also very bad that many countries in Europe and the EU have such low productivity. This is furthermore of course exacerbated if we also get higher tariffs.

We must address our own problems on a broad front in Europe and work on the different parts. This concerns, for example, a capital markets union, regulatory simplifications, and an energy system that works. This benefits Swedish companies and all other companies in the EU. That is where we apply a great deal of pressure.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Mikael Damberg (S)

Madam Speaker! The background to the interpellation is, therefore, the forecasts we have seen and a government that has been very optimistic and said: Now the turning point is coming, and now the brightening is coming! Now it turns upwards. We have presented well-considered budgets. We are doing the right thing, and our policy is doing great good!

I have no problems with the rhetorical angles. But at some point, one must look at the result, and there Sweden does not stand out in any positive regard. Our growth has not outperformed that in the rest of Europe. Unemployment has developed more negatively than in the other European countries. If Sweden had had the same average development as Europe when it comes to unemployment, 50,000 fewer people would have been unemployed in Sweden.

When it comes to bankruptcies, not least in new entrepreneurship, which we know is an important part of both progressiveness and the growth of new jobs, we have rather weak figures right now. It characterizes society.

Therefore, the government perhaps should not only have been satisfied, but one could also have reflected on whether the right trade-offs have been made. I do not mean either that a single budget between the government and the opposition makes such an enormous difference. It makes a difference for people's everyday lives whether they get a child benefit increase or not, or whether one invests in the worst-off pensioners.

My point is the direction. Had the government had a greater focus on ordinary household economics and the financing of welfare, we would not have had such a large loss. Had the government dared to discuss the housing sector's enormous challenges, they would not have withdrawn the few state interventions that existed, and if they had done so anyway, they would have needed to come up with something else.

The government has all the time just thought that it would turn around, and it has become costly for Sweden. Now they are there again and talking about the development ahead. The government describes the industry in a correct way; I have no problem with that. The question is only: What efforts do we see that the government has made? It is a failure regarding the energy policy so far. The government does not have the leadership in climate issues that the business community demands. Sweden also has other competitive disadvantages compared to some of the European industry that I do not think the government is addressing.

The speech at riksdagen.se, in Swedish (opens in a new tab)

Finansministern Elisabeth Svantesson (M)

Madam Speaker! Thank you once again, Mikael Damberg, for an important question! I must only state that I do not quite take this as a failure regarding energy policy because we inherited a situation with decommissioned nuclear reactors which now means that Sweden has too little electricity and too little power at certain times. But I will drop it now.

It is incredibly important to understand that the world is uncertain. It is important to understand that very many people have lost purchasing power. That is why we, from the very first moment in the first budget, have done a lot to support households. This applies to everything from electricity support to lowered tax several times over on both fuel, work, and pension. I am sure that we would have had a significantly more difficult situation without this.

We believe that it will turn around. I am not a general optimist, but everything points to that being the case. If one is to believe the IMF, which is also reasonably good at making forecasts, Sweden will during this year have a development with a growth at approximately the same level as the USA's. It is much better than both Germany's and France's. It remains to be seen, but we do what we can so that households will feel secure. Interest rates are now going down, wage increases are coming and taxes are being lowered - among other things. We believe that this will yield results and, above all, set the focus on the long-term.

Sweden shall be, and in many cases is, very productive. We shall be even more productive so that Sweden becomes the absolutely richest country one can be and all this prosperity will come to many more.

The interpellations debate was hereby concluded.

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