Swedish govt sees slower growth in 2022 as COVID resurgence bites

The government expects inflation - which hit levels not seen since the early 1990s in November - to ease back next year and average 2.1%, just above the central bank's 2.0% target. The centre-left government reintroduced some restrictions and support measures for businesses earlier this month and warned that more may be needed if the pace of new infections continues to increase.

Sweden's economy will grow slightly slower than previously expected next year, the government said on Wednesday, with rising level of COVID infections and measures to fight the spread likely to have a dampening effect on activity.

Sweden's economy has recovered strongly from the pandemic nadir, but a surge in new infections and the spread of the new and more contagious Omicron variant has clouded the outlook. The economy is expected to have grown 4.9% in 2021 against an earlier forecast of 4.4%, the Social Democrat government said in a fresh forecast.

Growth is seen slowing to 3.4% in 2022 against the most recent forecast of 3.5%, though the reintroduction of some restrictions increases the uncertainty related to the forecasts. "Even if it is a downward revision compared to the previous forecast (for 2022), it is still a strong level of growth compared to the historical average" Finance Minister Mikael Damberg told a news conference.

"If things develop in a dramatically different way with far-reaching restrictions for a long time, or there are global factors which impact the Swedish economy, it will have an effect," he added. The government expects inflation - which hit levels not seen since the early 1990s in November - to ease back next year and average 2.1%, just above the central bank's 2.0% target.

The centre-left government reintroduced some restrictions and support measures for businesses earlier this month and warned that more may be needed if the pace of new infections continues to increase.

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