This blog has argued for quite some time that the financial crisis would hit Sweden far harder than most Swedish economists and journalists anticipated. Already in November of last year, I proposed a stimulus package of at least 3% of GDP. This would be roughly 100 billion Swedish Krona (SEK).
Today Danske Bank argues in a report that Sweden’s economic situation is indeed in serious trouble. Unemployment will soar to 12% by 2010, and GDP is likely to contract by 4,6% this year. These are indeed appalling figures, and will probably bring about dangerous deflation.
It may be too late to avoid a deep and painful recession, but it is not to late to avoid a depression. The government must act forecefully. Now.