Sweden is expected to enjoy solid economic growth of about 3 percent y/y in 2015 and 2016, yet it faces intertwined challenges: Large migration inflows with effects on the labor market and on the budget; Rapid housing price increases associated with rising household indebtedness; and Low inflation and weakened inflation expectations. Macroeconomic policies should support a rise in inflation and contain upside risks to unemployment. The firmly stimulatory stance of monetary policy is needed to avoid prolonged low inflation that would prevent monetary policy from regaining space to cushion shocks. Such a stance should continue until core inflation is durably close to target. The broadly neutral fiscal stance appropriately avoids impeding these efforts to raise inflation. Likely additional expenses related to migration should be accommodated in the near term. Looking to the medium term, maintaining central government balance on average over the cycle would be sufficient to safeguard Sweden's fiscal buffers.
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|Size: ||6.9 MB|
|Publisher: ||INTERNATIONAL MONETARY FUND|
|Date published: || 2015|
|ISBN: ||9781513560687 (DRM-EPUB)|
|Read Aloud: ||not allowed|