Nordic Economic Slumps May Drag On, Reinfeldt, Stoltenberg Say
June 15 (Bloomberg) — Recessions in Norway and Sweden may continue for “some time” as labor markets in the largest Nordic countries’ struggle to adjust to export-led slumps and state coffers are depleted, the two nations’ premiers said.
“The forecast is that it could take a while and we are still in a phase where we are pushing through the crisis,” Sweden’s Fredrik Reinfeldt said in an interview while attending a meeting of Nordic premiers in Egilsstadir, Iceland, yesterday.
“Even if equity prices rise, it will take some time before we see improvement in the labor market,” Norwegian Premier Jens Stoltenberg said in a separate interview at the same meeting.
The two economies are experiencing their severest slumps since World War II as faltering global trade undermines demand for their exports. As unemployment surges, Reinfeldt and Stoltenberg have pushed through stimulus measures that target boosting the labor market, eating into public finances.
Sweden’s economy, the largest in the Nordic region, will contract 4.5 percent this year, the central bank estimates. The economy of Norway, the world’s fifth-largest oil exporter, will shrink 1 percent in 2009, according to its central bank.
“I foresee that we will have an increase in unemployment and a very tough budget situation for Sweden for a long time,” Reinfeldt said.
Swedish unemployment will rise to 8.9 percent this year and 11.7 percent by 2011, the government estimates. Atlas Copco AB, the world’s largest maker of air compressors, toolmaker Sandvik AB and airline SAS AB have warned of job cuts.
Exports account for about half of Swedish gross domestic product and the global slump in trade is forcing companies to shed jobs to stay afloat.
In Norway, unemployment will rise to 3.75 percent this year and peak at 4.75 percent next year, the Finance Ministry estimates. Stoltenberg, who faces an election in September, has pledged to spend 3 percent of GDP to reduce joblessness.
Sweden’s coalition government will spend 45 billion kronor ($5.8 billion) this year to stimulate growth, with 10 billion kronor of that earmarked for labor market stimulus. In 2010, it plans to spend 60 billion kronor to stoke demand.