‘Sober optimism is actually a driving force for the recovery’

The Economy has partally recoverd since the outbreak of the corona crisis. The spread of infection is, however, rapidly increasing in many countries, and Sweden is an export-dependent nation. Is it still possible to be optimistic about the recovery?

‘Yes and no. Our recovery has been greater than expected, and global trade has thus far shown great resilience. Even during October, the Swedish unemployment rate has continued to fall, and companies are opening up more job opportunities. The recovery is well underway in Europe as well, but it is hard to be optimistic about the end of this year. However, looking at next year, we again find rays of hope in the form of vaccines, huge stimulus programmes and, hopefully, a calmer political situation’, says Susanne Spector.

‘Sober optimism is actually a driving force for the recovery and can help the world out of this serious health crisis that both people and the economy are tackling right now. With great respect to all those affected by COVID-19, the optimist sees the following positive forces: ten or so vaccines are within reach – probably available at the end of the year; the financial support policy is extremely robust in terms of size (USD 19.5 trillion) and effectiveness; companies and households want to produce and want to consume and return to a more normal situation. This provides good fertile ground for the recovery to continue in 2021 even though it is expected to slow down a bit over the next half-year’, says Robert Bergqvist.

How well prepared is the Swedish economy for any new societal lockdowns?

‘There is still scope for the Government to go in and support vulnerable groups and industries, but with less ammunition seeing as it decided to tie up SEK 105 billion in the autumn budget, some of which is not going to specifically well-targeted measures. However, we can probably nonetheless expect financial support to continue in areas where the increased spread of infection and new restrictions are slowing down economic activity’, says Susanne Spector.

‘Sweden is heavily dependent on the outside world, and problems in the USA, Asia or Europe affect us directly by way of exports and jobs and indirectly by way of, for example, international stock market movements. “Sweden plc” has, however, a strong balance sheet. We have considerably more assets abroad than what we owe the rest of the world. The Government can also easily allow the national debt to increase in order to give additional financial support to, for example, companies, households and municipalities’, says Robert Bergqvist.

How do you see the recovery in the industries important for employing young people and foreign-born people, such as the retail trade and the tourism industry? What does this mean for integration into the job market?

‘For certain parts of the economy with many entry-level jobs, such as the hotel industry and the events sector, the recovery is going very slowly. Restaurants and, above all, parts of the retail sector have progressed further, which right now has perhaps, above all, benefited young people. We have to expect restrictions at least well into next year. At the same time, there is no reason to believe that there will not be hotels and restaurants in the future, so most of the entry-level jobs will be coming back. However, if there is a time when we should be investing in education, it is right now, especially for those without basic qualifications’, says Susanne Spector.

‘It will probably take longer for certain businesses to return to how it was pre-COVID-19. However, the services sector has been – and will be – an important part of the economy in order to create growth and get young people and foreign-born people into work. The stronger the growth, the better the conditions for integration into the job market. What we also see now is that the crisis has accelerated digitalisation. Changes in the economy will offer new and exciting areas of work and careers that might suit people about to enter the job market’, says Robert Bergqvist.

We asked Maria Eklöf and Malin Sahlén, senior consultants and associate partners at New Republic, about how they see the growth in the Swedish economy in the immediate future.

How do you see the growth in the economy and a possible recovery in the immediate future?

‘Uncertainty is palpable. The spread of infection is now increasing in Sweden as well as the rest of Europe, and many countries are once again shutting down parts of society to stop the spread. Uncertainty about the future also pervades the USA, another important export country for Sweden. Here both the pandemic and the result of the US presidential election are creating huge uncertainty’, says Maria Eklöf.

Malin Sahlén adds:

‘Many industries were already heavily affected by the spring downturn, and with the new restrictions in many regions, many companies will again be hit hard. Moreover, it is difficult to go through a new round of increased infection and restrictions; it worries people and that, in turn, can hit consumption, productivity and the economy’.

What is there to suggest a recovery when so much appears to be going in the wrong direction?

‘Before the pandemic hit, the economy was admittedly starting to slow down, but essentially we had healthy and productive companies. Digitalisation drove a transformation of the economy that Sweden appeared to benefit from. We also had healthy public finances with a low national debt. It laid a very good foundation and has made it possible for comprehensive financial support packages this year as well as during 2021. It now also looks like there will be vaccines for COVID-19 during the first half of 2021, which could radically change the situation’, says Maria Eklöf.

What needs to be prioritised right now for growth to continue heading in the right direction?

‘We have, above all, three areas in mind. Firstly, many companies are currently transitioning their operations. It may be driven by digitalisation, the pandemic or climate adaptation. They need the conditions for this and for making new investments. For that reason, they need to be able to retain key workers and find new ones with the right skills.

Secondly, it is important that the financial support packages are designed correctly so as not to promote idleness. During the spring, many were paid to stay at home, and that was perhaps justified; however, from now on the financial support given must promote development and activity in companies.

‘Lastly, special measures will need to be taken to support young people and foreign-born people. Youth unemployment is higher than ever before, and the situation is just as tough for many foreign-born people. This is very much due to various lines of business in the services sector having very limited demand during the pandemic, and with further restrictions in place, the situation can become even tougher. This requires cleverly designed financial support for these lines of business as well as education initiatives for many people now at risk of becoming unemployed’, concludes Malin Sahlén.

Susanne Spector and Robert Bergqvist were interviewed by Maria Eklöf and Malin Sahlén, senior consultants and associate partners at New Republic.

‘Three Quick Questions…’ is a series of interviews conducted by New Republic.