Sweden is anticipating a stronger-than-expected recovery in the world economy. However, the country’s Central Bank will maintain its relaxed monetary measures, supporting the country’s fragile economy and related ETF.
Sweden’s government upgraded its economic outlook to an expected contraction of 4.9% this year, followed by 2% growth next year and unemployment estimates for 2010 were lowered to 10.7% from 11.4%, as stated in BusinessWeek.
Current government stimulus measures have been a contributing factor for the more optimistic outlook, but the measures are calculated to incur a $4.7 billion budget deficit in 2010, increasing 3.8%, from 2.2% this year. Furthermore, the government will also reduce income taxes by $1.45 billion.
According to the National Institute of Economic Research, household pessimism about the Swedish economy is moderating, inching up to 7.5 in October from 5.6 in the previous month, and business confidence rose to -1 in October from -13 in July, according to RTTNews. Manufacturing confidence also increased to -12 from -20. All economic indicators were above economists’ expectations.
Sweden’s Riksbank left key rates unchanged at 0.25% and the Central Bank stated that the repo rate will remain low until fall 2010, report Paul Hannon and Robb M. Stewart for The Wall Street Journal. Any inflationary worries are negligible since annual inflation forecasts are well below target.
- iShares MSCI Sweden Index (NYSEArca: EWD): up 59.8% year-to-date
Max Chen contributed to this article.