Continued difficult situation in the Swedish economy

It was an expectedly cautious spring bill that was submitted to the Riksdag today. At the press conference, the Minister for Finance pointed out that the Swedish economy is still in a very difficult situation and the international situation makes it difficult to assess. The economy is being squeezed from several directions by inflation, high energy prices and interest rates and a war in our neighbourhood that is affecting our households and businesses. Energy prices have been lower than expected during the winter, but we still have high inflation. High inflation is holding back investment, businesses are becoming insecure and we are in a waiting game. We see central banks around the world acting forcefully and interest rates that have become very high in a short time. There is a lot of uncertainty about the duration of high inflation, but it is expected to fall in 2023 due to tighter monetary policy and lower demand.

The Spring Fiscal Policy Bill forecasts weaker GDP growth, which is expected to fall by 1% this year. There is thus reduced activity in the economy with weak domestic demand. The Swedish economy is in a recession, which is expected to deepen in 2024 and last until 2026. Inflation is expected to average around 8.8% during the year and then fall to 3.6%. 

The government does not see any dramatic effects on the labor market so far, but we expect and see signs that the labor market is starting to cool down. The effects usually occur with a certain delay, but the number of redundancies and bankruptcies is already slightly higher than normal in recent months and unemployment is expected to increase in 2023 and 2024 to 7.9% and 8.3% respectively. 

The Finance Minister emphasizes that we do not know how this recession will develop, but we believe that it will be somewhat more prolonged, but it is unclear how deep it will be. There is therefore still a great deal of uncertainty.   

It is a spring budget focused on tackling a difficult economic situation. The Finance Minister stressed the importance of a responsible fiscal policy together with reforms that establish the work line and increase productivity. 

During the press conference, it also emerged that the government will now return to order in the budget processes with a more normal spring budget that analyzes the economic situation and provides guidelines for the upcoming budget bill. During the period 2020-2022, 32 supplementary amending budgets have been presented.

A number of areas found in the spring bill
The government's spring bill does not leave any major digitization policy imprints, but there is work and sometimes signals in a number of areas that deserve to be highlighted. 

Digitization in the welfare sector
The spring bill addresses the welfare challenges of the future and there is an insight into the demographic challenge. Welfare technology is mentioned as a subset of the solution, even though the focus is on trying to solve the skills issue. However, there is no direct investment in digital solutions, even in the issue of the shortage of care places, where the government is still allocating funds. The big question is above all where the digital infrastructure for healthcare has gone. This was a milestone in Swedish politics when it came to digitalization in the welfare sector when it was included as a reform in the Tidö Agreement and an important transformation for Swedish healthcare. It is also critical to embrace the opportunities of digitalization on a broad front. This needs both time and resources. It is therefore essential that investments are made early in the mandate period and that a budget is allocated, which unfortunately is not now being done. There is an imminent risk that this will be an unfinished thought experiment if it is not prioritized.

Environment and climate
Since the change of government, the government's climate policy has been questioned from several different quarters and there is a lack of clear political leadership in this area. It is not easy to get a grip on how the government intends to act for the environment and climate during its term of office, but based on this spring amendment budget, it can at least be stated that spending on environmental and nature conservation will be significantly reduced during 2023-2026. Although the link is not directly to the tech industry, it is definitely indirect. No green transition without tech. 

In the area of the environment and climate, the Government states that, in order to ensure cost-effectiveness, it will review the policy instruments and government organization in the climate area. It is mentioned that the Government will submit a climate policy action plan to Parliament this fall, which will describe how the Government's policy can be expected to contribute to achieving the climate goals. TechSverige is working to develop concrete proposals for action for the action plan.

In addition, the Government mentions that an inquiry will be set up in the spring to simplify and shorten the environmental permit process under the Environmental Code by making it more flexible, efficient and predictable in order to ensure the competitiveness of business and Swedish industrial production and to promote a green transition. In addition, the government plans to return with an energy policy bill in the fall, with the greatest focus on nuclear power. The measures as such are welcomed as it is important that these issues are prioritized for a sustainable transition and a competitive business community, but it is important to look at the entire energy system with a focus on fossil-free energy where a cost-effective and secure supply of electricity is a prerequisite for Swedish business and our competitiveness. 

Reduced funding for digitization authorities
Funding for the Swedish Post and Telecom Authority and the Swedish Agency for Digital Government (Digg) will be reduced by a total of SEK 1 million. Not a large sum, but the wrong signal from the government when Sweden is lagging behind in digitization and needs to pick up the pace. 

Investing in education is the right thing to do, but long-term investments and reforms are needed to meet the needs of the labor market
Now is the time to prepare Sweden for change and strengthen our ability to adapt. We will do this primarily by investing in education and skills development. It is therefore positive that the Government is increasing the number of places in higher vocational education by 950 in 2023. For the initiative to have the intended effect, investments in this form of education must be long-term. Investments in more places also need to be accompanied by reforms that enable greater diversification of the courses offered by universities of applied sciences. It is also important that universities of applied sciences can develop with quality and high throughput. TechSverige regrets that investments in education for professionals in higher education are not included in this budget. 

Data-driven innovation and open data
The EU requires that particularly valuable datasets be made available for re-use. In the past, the government has used an exemption to postpone this implementation. However, the spring amending budget takes a welcome first step. Through a reprioritization, Lantmäteriet will receive SEK 20 million to adapt the technical standards for the geographical data provided by the authority. This is a step in the right direction, but the previously decided exemption also covered four other authorities: the Swedish Companies Registration Office, the Swedish Maritime Administration, the Geological Survey of Sweden (SGU) and Statistics Sweden (SCB). There is more to do for open data.

Strengthen Swedish competitiveness and reduce the regulatory burden
The Spring Fiscal Policy Bill emphasizes the need to promote growth by creating the best possible conditions for a competitive and innovative business sector. A Productivity Commission will be appointed in the spring to analyze obstacles to and opportunities for raising productivity growth in the Swedish economy, and an implementation council will be established in the Government Offices to reduce the regulatory burden and administration for companies. TechSverige has previously welcomed the proposals with a clear hope that the opportunities of digitization will be taken advantage of in the work of the Productivity Commission and the current legislation adopted, both at EU and national level, will be based on the principle "Think small first". 

A good business climate and a more ambitious tech policy are of great importance for competitiveness, jobs and welfare - in a sustainable society.

In summary, as in the autumn, the bill is characterized by high inflation and recession. However, there are signals that inflation is coming down and it is now important, ahead of the autumn budget bill, to continue the reform work to solve future social challenges and strengthen Swedish competitiveness.

Christina Ramm-Ericson,
Head of Industrial Policy and Chief Economist