A brighter outlook for the Swedish economy
It was a slightly more positive Minister for Finance who on Monday presented the Government's spring economic bill and spring amending budget to the Riksdag. "We have recently become accustomed to the description that the Swedish economy is in a difficult situation with great uncertainty, where fighting inflation has been the top priority. We are now seeing a shift. Finance Minister Elisabeth Svantesson (M) still insists that the situation is difficult, but inflation has clearly fallen back in Sweden.
The spring budget amendment forecasts weak growth, with GDP declining by 0.2% in 2023, but it is expected to increase slightly by 0.7% this year and 2.5% in 2025. This reflects subdued activity in the economy, which has been going on for some time with weak domestic demand. The recession is expected to last until 2025. Inflation averaged around 8.5% in 2023 but is projected to fall this year to 3.1%. Given these figures, the Finance Minister makes it clear that we are not in a deep recession.
In the labor market, labor demand is low and the unemployment rate across the labor market is expected to continue to rise in 2024 to 8.3% and is expected to remain high in 2025. This is mainly due to the difficulty of entering the labor market.
The Finance Minister pointed out that there is still uncertainty in the economy, with a number of risks linked to supply shocks, such as higher energy and commodity prices, which could lead to inflation being higher than expected. Demand abroad may also be lower than expected given that developments in the euro area have been more subdued, particularly for the German economy, which has had weaker growth that affects Sweden. This could lead to a deepening and prolongation of the recession.
It is a spring budget that continues to emphasize that the economic situation is difficult but with a brighter future ahead and where the main focus is on investments in welfare and health care as well as defense and justice.
A number of areas included in the spring amending budget
A number of areas in which the government's spring amending budget leaves a digitization policy imprint that deserves to be highlighted and where TechSverige has been a strong driving force.
Securing the future of Swedish welfare
In early March, the government gave an advance notice of extra resources to strengthen healthcare. It is welcome that SEK 6 billion is being provided, but it is unfortunately only in the short term and only a quick fix to cover sharply rising pension costs in the regions. However, there is a lack of forward-looking reforms in this area, despite the fact that the government has shown an understanding of future challenges with demographics and skills supply.
The fact that the future welfare challenges are addressed in the budget is positive, as is the recognition of the demographic challenge. It is crucial that the opportunities offered by digitalization are taken advantage of and are part of the solution.
Below are a number of proposals that deserve to be highlighted in the context of the additional resources:
- The funds should be used efficiently and close to care
The government's stated expectation is that the regions will use the money to avoid redundancies of healthcare staff in core activities. The funds must be used efficiently and the regions need to prioritize core activities over peripheral activities that include innovation. TechSverige believes that innovation should be prioritized over administration in peripheral activities if the funds are used there. The short-term work is to provide money, while long-term work should be started to help the regions solve the structural problems.
An efficiency delegation for health care will be established on 1 July 2024 to support regions in implementing structural measures that can make these activities more efficient through government funding. Regions can apply for funds and the allocation of funds will include stringent requirements for reporting and follow-up. A special regional review function tasked with reviewing the regions' financial situation will strengthen the review and evaluation of the regions. The focus will be on the appropriate use of resources, cost-effectiveness and efficiency potential. TechSverige hopes that a strong focus in this work will be on the power and potential of digitalization as an indispensable piece of the puzzle.
- A national digital infrastructure is accelerated
The investigator tasked with enabling a national digital infrastructure for health data will be provided with additional funds and the final report on the assignment will be brought forward. A digital infrastructure for healthcare is a necessary component for taking advantage of the opportunities offered by digitalisation. It is also good that the work is being accelerated for the simple reason that the European Health Data Space was recently decided and will therefore put pressure on Sweden's work on the digital infrastructure.
- Methods to measure and better use available capacity will be developed
The National Board of Health and Welfare and the Swedish eHealth Agency will be tasked with developing methods for measuring available capacity or proposing solutions that make more efficient use of available staff from a national perspective and will be allocated SEK 10 million in the spring amendment budget. We hope that new technologies such as AI and machine learning will be utilized in this work.
Strengthening the link between the green and digital transitions
The Government proposes that the Climate Investments appropriation be strengthened by SEK 100 million for increased support for charging infrastructure for electric vehicles at local and regional level. In addition, the authorization to grant large and more long-term investments that are important for the climate transition is increased by SEK 500 million. The government has clearly announced that it is focusing on making the transport sector more efficient. Therefore, these investments are positive, both for this year's allocation and for long-term investments. The link to digital solutions is obvious to us, but does not seem as obvious to the government. This is also evident in the national climate adaptation strategy recently presented by the government, where digital solutions are only mentioned in passing.
One positive piece of news outside the spring budget amendment, submitted by the government on April 9, is that the Swedish Institute will be tasked with setting up and coordinating a Team Sweden group with the aim of creating greater confidence in Sweden abroad. Although the assignment is prompted by the recent disinformation campaigns against Sweden, part of the strategy is to promote Sweden as an innovative country with a focus on the green transition and digitalization. The intention is also said to be to involve the business community more than before. This is a very welcome initiative that TechSverige looks forward to following and is happy to contribute to.
Right to invest in recruiting international tech specialists to meet labor market needs
International skills are an important and necessary part of the tech industry today. For Sweden to remain a leading tech nation, it is crucial that we attract and retain the best tech talent. In 2024, the Government will allocate SEK 25 million to strengthen the coordination of the work of around ten government agencies to attract and retain international skills TechSverige welcomes the initiative but believes that coordination requires a clear and ambitious national strategy to increase Sweden's global attractiveness.
In connection with the spring budget amendment, the government also proposes to appoint a special inquiry to improve the conditions for foreign doctoral students and researchers in Sweden. TechSverige welcomes the commission. Sweden's role as a nation of knowledge and Sweden's attractiveness as a final destination are jeopardized when the conditions for residence permits for work, research and doctoral studies are general and ambiguous, both for those who apply for a residence permit and for those who will handle the application.
More efforts needed to secure skills supply in tech
The extensive digitization and AI development taking place both in Sweden and globally means that the demand for tech skills is growing all the time. Demand is increasing not only in the tech industry, but throughout business and the public sector. TechSverige estimates that there is a need for 18,000 tech specialists per year up to and including 2028. To meet the demand for tech skills and future-proof Sweden, high-quality IT education is required in both higher education and universities of applied sciences, but also access to further education and skills development for those already working. These are initiatives that are missing from the 2024 spring amending budget.
TechSverige believes that it is urgent that the government continues to increase the compensation amounts for IT education in higher education and that the throughput on these programs increases. The Swedish Higher Education Authority (UKÄ) should be given the task of continuously following up and analyzing dropouts and the reasons for them. UKÄ should also work to promote this by sharing good examples between higher education institutions. It is also important that access to further education is strengthened in both higher education and universities of applied sciences. Short and flexible courses, fixed or distance, are important to achieve this.
Reducing the regulatory burden to strengthen Swedish competitiveness
It is also positive that the Government is now proceeding with the previously announced Simplification Council, which is being established as a special decision-making body at the Swedish Agency for Economic and Regional Growth to identify simplification measures arising from Swedish law and produce concrete proposals. Good conditions for companies to conduct their business are a prerequisite for Swedish competitiveness and TechSverige has a clear hope that both new and existing legislation will be adapted to the "Think small first" principle.
New digitalization strategy must not be delayed
In the state budget for 2024, the government stated that Sweden will not reach its goal of being the best in the world at using the opportunities of digitalization. Many countries are running faster and investing significantly more in technologies such as AI and 5G. It is promising that the government is now reviewing its digitalisation policy with a view to presenting a new digitalisation strategy in 2024 with concrete goals and trend-breaking measures to reverse the trend by 2030. However, the world is moving too fast for Sweden to stand still while waiting for a new strategy to be completed before the end of the year. The limited investments in the spring amending budget for a competitive digital Sweden are therefore worrying. It is now important that the government both prioritizes getting the strategy ready and does not wait to launch the proposals already on the table.
Strengthening information and cyber security
The deteriorating security situation and the risk of cyber attacks have prompted the government to strengthen its work on information and cyber security. The Swedish Civil Contingencies Agency (MSB) will receive a reinforcement of SEK 20 million to expand support for cyber incidents. Continued broad work on information and cyber security is welcome. It is important that MSB's work on cyber incidents reaches more people and more quickly, but more efforts are also needed, especially for the supply of skills in information security
In summary, the spring budget bill is characterized by weak growth and low demand for labour. However, given that inflation is starting to fall, the government has room for maneuver and should focus on creating good conditions for innovation, tech entrepreneurship and growth ahead of the autumn budget bill so that the economic recovery does not drag on. This is needed if Sweden is to keep up with the rapid development taking place in other countries and remain a technology nation to be reckoned with in the future.