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Swedish elections: Economic policy implications - ING

"The Swedish economy is doing well. After several years of strong growth, government finances are in good shape (net government debt is below 30% of GDP)," note ING analysts.

Key quotes

"Though we see a slowdown ahead, and the potential for a rather nasty downturn if weakness in the domestic economy were to coincide with a global downturn, the immediate situation facing the new government is fairly benign."

"Given the fiscal rule, regardless of what shape the next government comes in, fiscal policy will not change materially. Major reforms (a comprehensive tax reform and a new housing policy have been mooted) would likely be undertaken through cross-party consensus, which will be a slow-moving process and likely a story for 2019 or later."

"Deliberate disruption (the Swedish Democrats have called for a referendum on EU membership, while the Liberals want Sweden to join the euro) looks unlikely. Neither is a realistic political proposition: polls suggest Swedes are content with the status quo – less than a quarter would support leaving the EU, and less than 20% want to join the euro."

"Looking a bit further ahead, a weak minority government could lead to difficulties in some scenarios. If there was a sharp slowdown (for example, due to the housing market taking a turn for the worse, or the global trade war worsening) and difficult decisions had to be taken, a minority government may struggle to take decisive action."

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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