20240310-IMF-Sweden_2024_Article_IV_Consultation-Press_Release_and_Staff_Report_56页_1mb

IMF Country Report No. 24/70 - Sweden:
2024 Article IV Consultation Summary

Economic Context:
Post-pandemic growth has slowed significantly. Sweden's GDP is estimated to have declined by 0.3% in 2023, driven by reduced private consumption and residential investment, confronte with increasingly tight financial conditions and declining real incomes. Growth forecasts for 2024 average 0.2%, picking up gradually thereafter as financial conditions ease.

Inflation has declined but remains high. Core inflation at 5% in December 2023 is expected to return to the 2% target by mid-2025. The labor market is showing cooling signs, with employment growth moderating.

The commercial real estate sector is hard hit by high leverage and deteriorating debt-carrying capacity. While the banking system is resilient, banks should maintain tight macroprudential policy in light of elevated systemic risks, including high debt and CRE exposures.

Policy Discussions:

1. Monetary Policy: The Swedish Riksbank's stance remains contractionary and restrictive and necessary to ensure inflation returns to target by mid-2025, especially in the first half of 2024. Inflation risks require a data-dependent response.
2. Financial & Macroprudential Policies: Higher capital requirements for bank exposures to CRE and potential sectoral risk buffers should be considered. Greater monitoring of systemic risks and better crisis management strategies are crucial.
3. Fiscal Policy: The planned broadly neutral fiscal stance for 2024 accommodates public support measures for the vulnerable while maintaining fiscal space for potential downturns under automatic stabilizers. Increases in net lending would be needed once the economic cycle stabilizes and objectives are achieved.
4. Macro-structural Reforms: Boosting productivity and the green transition is key. Priority areas include reforming labor markets (e.g., improving digital skills, employment support), the housing market (easing construction restrictions, rent controls), and climate policy alignment.

Summary Assessment:

• Growth outlook is mildly negative through 2024, then gradually improves towards its potential rate.
• Inflation is expected to moderate but remain on a path to meet the target.
• A restrictive monetary and fiscal policy stance is recommended to ensure the target is met.
• Progress on implementing Financial Sector Assessment Program recommendations is commendable.
• Systemic risks are high given high household debt and CRE vulnerabilities. Further strengthening of prudential policy is needed.
• The rating of fiscal risk is high due to sovereign gross financing needs.

Risk Assessment:

• Upside risks for growth include the resilience of private consumption if the disinflation process stabilizes.
• Downside risks include sharper-than-expected effects from financial tightening restraints and further corrections in the CRE market. Currency depreciation remains undervalued.

Authorities broadly shared staff's assessment.