Global Macro forecast by Handelsbanken: Global economy poorly equipped

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The global economy has lost momentum, and there is growing concern that there will be a sharp slowdown, particularly among households. “We expect growth in Sweden to slow down markedly this year, and there are leaner years ahead,” says Handelsbanken’s Chief Economist, Christina Nyman.

Despite the declining global economy, many jobs are still being created in Sweden. However, the increasingly weak international trend will also affect the Swedish economy and, in Handelsbanken’s assessment, unemployment is set to rise in the next few years.

“This is not a deep crisis that we foresee, but several years of weaker growth,” says Christina Nyman.

Following the growth spurt in the Swedish economy toward the end of last year, GDP will slow down when the decline in global growth affects Swedish companies and housing construction decreases.

“Despite healthy incomes, households have become more concerned about the economic trend. This is a tendency that is evident in many countries,” says Christina Nyman.

Handelsbanken’s assessment is that the Riksbank will hike the repo rate once more, in September, but that the increase is by no means a given. After that, Handelsbanken does not see that there will be any more increases and expects the repo rate to remain at zero per cent in both 2020 and 2021.

The global economy is set to slow down in a typical late-cyclical pattern, with less expansive policies and capacity constraints having a subduing effect, according to Handelsbanken’s forecast. The persistent political uncertainty and trade conflicts are expected to continue burdening corporate investments and household consumption, and represent the main concern in Handelsbanken’s forecast.

Central banks have changed course, in order to ease the slowdown. In the assessment of Handelsbanken’s economists, the ECB will not hike the refi rate during this economic cycle, while the Federal Reserve, which is starting from a higher rate level, will cut the funds rate next year.

“But today, there is far less possibility to kick-start growth through key rate cuts, and public debt is high in many countries. The global economy is poorly equipped to cope with an economic downturn,” says Christina Nyman.


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