Sweden braces for deep recession

The financial crisis is hitting the Swedish economy with full force as the credit squeeze tightens the belt of almost all types of business enterprise, reports Dagens Nyheter today. The recession is the worst yet since the 1990s, and it is predicted that 100,000 jobs will disappear from the Swedish market.

In a report by the Institute of Economic Research (KI), not only will 100,000 jobs leave Sweden but unemployment will rise from 6 to 8 percent. When the Lehman Brothers- one of the world's biggest investment banks hit the rocks in mid-September this year, the KI was forced to revise its recession forecast. The widespread loss of confidence in the banking system made it impossible for the credit system to function. KI revised its August analysis- and the economic forecast is worst than expected.

The GNP or Gross National Product - which measures the value of all production and services of a country, will grow by only 1.2 percent. Even in the forthcoming last quarter of the year and the 1st quarter of 2009, the GNP growth will contract to 0.1 percent. In 2010, the economy is expected to improve although not enough to create more jobs. "We see no recovery before 2010," says Urban Hansson of KI.

As the Swedish economy dives into unprecedented recession, the parliament approved on Wednesday a stability package presented by the Alliance government. It takes effect today, Thursday. "The objective is not to support the banks but the households with loans and companies that need credit for their orders," says Finance Market Minister Mats Odell. The stability package consists partly of a guarantee for the banks' borrowings, and partly on the rules on how banks in crisis could be saved. The guarantee amounts to 1500 billion SEK. The state will take in from banks and other participants a total of 2.64 billion SEK yearly.#