The Impact of Covid19 on Swedish Economy
With restaurants closing down, airline agencies going bankrupt, our educational systems being in lockdown, and worldwide pandemic flowing through our neighborhoods forcing us inside our homes and leaving us no choice but to work at home, economists are warning us that a global recession is no more a potential threat. It might already be closer than we think.
Stock markets and banks
Large shifts in the stock markets will cause investors to inevitably sell their shares. Meaningless goods and services will be provided to the public, which in turn, will cause a multiplier effect. This means that people will start to save money and try to create a surplus of resources such as toilet paper and canned foods in their homes, resulting in our economies slowly tumbling down into a seemingly endless black hole of economic devastation. While we do not have clear prospects of what will happen in the future, here are some potential impacts this pandemic might have on our economy.
Central banks in more than 50 countries have decided to lower their interest rates to combat personal savings and make sure that the economic “wheel” is still turning. For example, the Central Bank of UK decreased their interest rates in order to make borrowing cheaper, so that people can spend more and spur the economy.
Considering that more than 100 countries have travel restrictions (including trade unions), this could mean that as mentioned before, airline agencies, such as Norwegian are laying off more than 50 percent of their employees (E. Liljeström). Since the airlines are heavily dependent on both the price of oil and the demand for trips around the world, this crisis will without doubt cause a massive breakdown in both the airline industry and imports/exports across the world (BBC).
Consequently, this means that vacations outside Sweden’s borders are currently out of question and considering that Europe is on the lockdown, in the countries such as France, Germany, Denmark, Spain, Italy and many more, traveling industry and tourism are to hit solid bottom. According to Elias Liljeström, a journalist at THE LOCAL, the tourism sector in Sweden has had to lay off more than 15,000 employees as of March 16.
The lockdown in Sweden
The Swedish government is now urging citizens to stay at home, regardless if symptoms of the virus are present or not, as not to lose control over the overconsumption of scarce medical resources needed to treat as many patients as possible. Furthermore, this has led to the lockdown of high schools and universities in order for students to decrease the risk of spreading the virus throughout our society. Currently there are almost 27,155 active cases of the outbreak, and with 4,350 deaths and 4,971 recovered patients (as of 30 May), it can be concluded that the fear imposed on us is without question very real. On the other hand, the Swedish government has taken very drastic measures to fight back against this pandemic, which have proved to be effective so far.
Swedish budget- emergency package
According to THE LOCAL.SE, the government has proposed a “budget emergency package” to the Swedish parliament of up to 300 billion kronor ($31 billion). Their strategy is to reduce work hours while still retaining 90% of the workers’ original salary. However, both the employers and the employees of these businesses that are given the subsidy must agree upon the suggested emergency package budget in order for it to be available for them.
Extra funding for health services
Extra government funding has been distributed to the Public Health Agency ff Sweden (Folkhälsomyndigheten), the National Board of Health and Welfare (Socialstyrelsen) and finally, the Swedish Medical Products Agency (Läkemedelsverket), with the budget of 66 million kronor ($6.3 million) to support their work. (THE LOCAL se).
The Swedish Financial Supervisory Authority has suggested lowering buffer rate requirements for banks in order to increase their lending capacity. This is mainly to counteract the multiplier effect, as it will encourage more businesses and private consumers to start investing and inserting more cash into the system to keep the inflation rates as low as possible
In conclusion, Covid-19 is causing devastating meltdowns in major industries such as airline, tourist, and travel industries in both Sweden and the rest of the world. As mentioned previously however, seeing the percipient precautions the Swedish government has decided to implement in this country during what is seemingly a very stressful period, reassures us that we are capable as a country to move through this pandemic.
Written by Mathias Nordin, Lund, Sweden