Stockholm - The Swedish government has revised its economic outlook and does not rule out recession in one scenario, Finance Minister Anders Borg said Monday. The two main scenarios suggest that growth will either be flat next year or, in the worst case, shrink 1.2 per cent.
"The global financial crisis is the worst since the depression (in the 1930s) and the Swedish financial markets have their worst crisis since the 1990s," Borg told reporters.
According to one of the finance ministry scenarios, the crisis will worsen with falling prices and export demand. In combination with the credit crunch, the Swedish economy will grow just 0.1 per cent in 2009, and 2.0 per cent in 2010.
In the budget bill presented in September, the government had forecast the economy would grow 1.3 per cent in 2009.
The worst-case scenario suggested the economic downturn would be even stronger, and the economy will contract even more - shrinking 1.2 per cent in 2009.
Unemployment was also due to rise, hitting 7.8 per cent in 2009 and over 9 per cent in 2010 in the worst-case scenarios, Borg said.
The finance minister's remarks were a step towards "an economic assessment that is more adjusted to reality," Robert Bergqvist, chief economist with banking group SEB, told Swedish radio news.
Bergqvist added that the government had "underestimated" the strong negative forces in the global economy and might be forced to increase government spending.
Borg told reporters the government would maintain fiscal discipline and was critical of calls from the Swedish Confederation of Business to increase spending.
The finance minister also repeated impatience that only one of the four groups, Swedbank, has so far signed on to a stability package introduced last month.
Borg said the government was mulling other measures to get the banks onboard but did not not spell them out, underlining the need to get credits flowing.
