The National Institute of Economic Research upgraded Sweden’s growth projection citing export growth and higher household consumption.
In the economic forecast released Wednesday, the think tank said the economy will grow 3 percent in 2015 instead of 2.8 percent estimated in June. Meanwhile, the outlook for 2016 was lowered marginally to 3.1 percent from 3.2 percent.
Economic growth is forecast to slow to 2.6 percent in 2017 and to 2.1 percent in 2018.
The government last week raised its growth forecast for this year to 2.8 percent from 2.6 percent predicted in June. The projection for next year was upgraded to 2.8 percent from 2.7 percent.
According to NIER, the biggest contribution to growth will come from exports, which is forecast to grow at 4-5 percent in coming years, buoyed by an investment-led economic recovery in the OECD countries and a weak krona.
As the economy strengthens, fiscal policy will need to be tightened to bring public finances into balance. It will translate into spending cuts and tax increases in years ahead, the think tank cautioned.
The Riksbank is expected to cut its repo rate to -0.45 percent in December in a bid to get inflation and inflation expectations to come up more quickly, NIER said. The repo rate is then assumed to remain at this level until the end of 2016, when a series of rate increases will commence.
Consumer prices are expected to rise 0.1 percent in 2015 and 1 percent next year. The projection for this year was left unchanged, while lowering next year estimate from 1.2 percent.
The think tank expects inflation to rise more slowly than in the Riksbank’s forecast. Inflation is forecast to rise to 2.2 percent in 2017 and 3.1 percent in 2018.
The material has been provided by InstaForex Company – www.instaforex.com