Sweden's Bold Economic Stimulus: Experts Weigh In

Several experts agree that significant investments may be necessary to stimulate the economy.

"Sweden can absolutely afford this," says Swedbank's chief economist Mattias Persson, who supports the government's decision to invest its way out of the recession.

The government has announced 80 billion kronor in budget investments for next year.

"It's good, Sweden needs it. I completely agree with that view," says Mattias Persson.

However, he believes it's not enough to jumpstart the economy.

"We still need interest rate cuts from the Riksbank. Fiscal policy cannot carry the entire load," says Persson.

Uncertainty Over Interest Rate Cuts

Nordea's chief economist Annika Winsth says that 80 billion kronor is "more than most expected."

"It's quite a lot. But we are in a recession, we have strong public finances, and it's an election year. In this environment, it's not surprising to have an expansive budget," she says.

According to Winsth, the expansive fiscal policy increases the likelihood that the Riksbank will not cut interest rates this fall.

"We have an inflation rate above three percent, and unfortunately, we believe it will continue to be high, with high food prices," she continues.

"Many households find it expensive to live. So it's difficult for the Riksbank to cut rates even if the economy is weak. It's reasonable to use fiscal policy instead."

Focus on Jobs

Both LO and the Confederation of Swedish Enterprise welcome the announcement.

"Now it's important to make wise reforms that create growth and jobs," writes LO's chief economist Torbjörn Hållö in a comment.

Sven-Olov Daunfeldt, chief economist at the Confederation of Swedish Enterprise, shares the same view:

"It's good that the reform space is generous. The important thing now is how the money is used. To boost growth, we need reforms that strengthen the incentives to work, invest, and hire. This would strengthen both companies and households," he says in a comment.