Experiences from the Swedish Crisis in the 1990s – An Opportunity for a Complete Makeover
By John Hassler
Published in Intereconomics in 2016
Abstract
The Great Recession that started in 2008 affected Sweden no less than most other OECD countries, and the fall in Swedish GDP between 2008 and 2009 was the largest recorded since 1931. The GDP gap was more negative in 2009 than under the recession in the early 1990s. Real GDP fell by six per cent during the crisis year of 2008 and 2009, which was nearly three per cent more than the OECD average. During the crisis in the early 1990s, it took three years for real GDP to fall by five per cent. Despite this fact, the negative effect of the latest recession on public finances has been contained. Automatic stabilisers have been functioning as intended, and there has been little domestic amplification of the negative consequences of the fall in foreign demand. Unemployment increased much less than in the 1990s. Employment fell initially but in 2010 began to increase again. Corrected for changes in the age composition of the labour force, employment is now back at pre-crisis levels, despite large inflows of immigrants and the fact that Sweden already has the highest employment rate in the EU.
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