Sweden - Economic forecast summary (November 2015)


Output will continue to grow briskly, at around 3% per annum, supported by low interest rates and rising wages, which will lift consumption and inflation. Employment continues to grow and unemployment is declining. Business investment will increase further in response to rising demand, and surging house prices will continue to support residential investment, but may also pose risks.

Monetary policy is expansionary, which is necessary to move inflation towards target. The housing market is overheating and further macro-prudential measures are called for. Phasing out mortgage interest deductibility would help to contain the rise in housing demand and household debt. The large inflow of migrants poses a challenge in terms of employment, housing and integration into society more broadly. Meeting this challenge will call for a vigorous programme of up-skilling and language training.

Greenhouse gas emissions ceased to increase decades ago, partly thanks to the long-standing carbon tax and participation in the EU Emissions Trading Scheme. As a result, greenhouse gas emissions per unit of output are among the lowest in the OECD. Reducing emissions further in accordance with bold targets will require enhancing the coherence and cost-effectiveness of policies.


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