An Overview of the Economy
Sweden has stood out among European nations and the world for the way it has handled the pandemic, not shutting down the country or the economy like others but relying on citizens’ sense of civic duty. The Swedish economy expanded at a far superior rate than many of its European counterparts over the first three months of the year, following the government’s decision not to impose a full lockdown to contain the spread of the coronavirus.
The Nordic country’s statistics office reported gross domestic product (GDP), the broadest measure of economic health, grew at an annual rate of 0.4% in the first quarter.
Sweden’s GDP increased by 0.1% in the first quarter, when seasonally adjusted and compared to the final three months of 2019.
The median forecasters in a Reuter’s poll of economists had expected to see a 0.6% contraction on a quarterly basis. Confinement measures were brought in toward the end of the first quarter. As a result, economists expect countries to report an even sharper contraction over the next three months of the year. It comes at a time when Sweden has the highest coronavirus death rate in the world.
Sweden’s central bank said the pandemic had damaged the country’s business and supply chains and warned many companies would be “hit hard,” with lots of people likely to lose their jobs over the coming months. The National Institute of Economic Research, a respected think tank, said in a statement published April 29 that it believed Sweden’s economy would shrink 7% this year, with unemployment anticipated to rise to 10.2%.
For quite some time, Sweden has been held out as a ‘model’ of a number of things. The country is held as a model of great socialism. It also sets an example as a country with the finest public health system in the world. Lately, Sweden has been considered the model for dealing with the coronavirus crisis. Sweden followed a method that was different from the rest of the world, and particularly different from the rest of Europe.
Sweden decided early on when countries were debating over how to deal with it, that they will not go for a countrywide lockdown. Instead, they put in place voluntary social distancing and bans on non-essential travel. Social gatherings were restricted to under 50 people, and people were advised not to visit old age care homes.
The rationale for choosing this less restrictive approach was the view that the pandemic would last a long time. Therefore, measures need to be socially and economically sustainable, while also keeping infection rates at a level that the Swedish health system can handle. The latter objective seems to have been achieved. However, the death toll so far has been relatively high. Deaths have been concentrated along demographic, geographic, and socioeconomic lines: 50 percent of deaths occurred in elderly care facilities, and the 70+ age group accounted for almost 90 percent of all deaths.
In addition, greater Stockholm accounts for 50 percent of the deaths, with areas that have a higher share of persons that are foreign-born or have foreign-born parents being more heavily affected. This highlights the challenge of protecting the vulnerable in the absence of a more stringent lockdown, even in a country with favorable socio-demographic characteristics, including a very high share of single-person households. The outcome could have been worse in countries with different demographics, resources, or history of abiding by social contracts.
Strategies Adopted By Other Countries
India decided on a draconian full lockdown for three weeks. Three more weeks after that, it is slowly opening up. Now we’re opening up a little bit more so six weeks of complete draconian lockdown.
On the other hand, some countries decided to have a partial lockdown, for example, Pakistan. Countries like the US and the UK, initially thought that there was no need for lockdown, but soon enough they realised it was not working. With the trend of infectivity in UK, it was thought that the country would have been better off staying with the initial idea proposed by Prime Minister Boris Johnson and his advisors of going for herd immunity. They wanted to achieve this herd immunity by asking old people to stay at home while letting young people go out and get infected. A few will die but in the process, a large enough percentage will get immune and thereby they will give the entire population herd immunity. Britain initially started on this plan, but when infections went up and the death toll started rising, they lost their nerve and went back to the idea for lockdown.
Brazil was held as the worst example, where President Jair Bolsonaro dismissed the disease as a ‘little flu’.
On the other hand, South Korea was a country that was held out as a model for the whole world. It tested a large number of people and was able to block the virus very fast.
The country employed one person to track every contact. Any contact that disappeared from sight or was not traceable for even a few hours was fined $10,000.
The other model that was seen to have worked was New Zealand. In fact, the success of the country started a whole clamour about Prime Minister Jacinda Ardern, with people taking to social media hailing her as the one who should be the leader of the world.
Sweden has had 4,542 deaths in a population of one crore. In fact, if you just extrapolate this to India’s population, for example, it would be equal 5,56,000 deaths. This is despite the fact that Sweden is 30 times richer than India and with a much lower population density. It has the world’s best public health care system, the finest doctors and the most aware population. All these mathematical models of epidemiological studies on viral spread were based on viruses that we had known earlier, this is a new kind of virus. And perhaps these mathematical models don’t apply to this virus.
If the European countries are compared based on deaths per million, Belgium is the highest with 833. UK is the second highest at 597. Spain is the third worst at 580. Italy comes fourth with 556 and the fifth worst is Sweden with 446 per million and still rising. Other countries have had their lockdowns, they are opening up. They’ve suffered the economic damage in those lockdowns, but they are now opening up and their economies are opening up and their fatality rates are not dropping quite steeply. In Sweden, on the other hand, the lockdown is still not there. They decided to go the herd immunity way. Their fatality rates per million are catching up with the worst in the world and the deaths are not declining.
They’ve already suffered economic damage. Sweden’s finance minister Magdalena Anderson has now said that its GDP decline this year will be about 7 per cent. According to her, this will be the worst year of Sweden’s economy since World War II.
Domestic containment policies have a greater bearing on domestic demand, and particularly on non-tradeable—such as services—rather than tradeable sectors. The purchasing managers index (PMI) and other indicators that capture the perspectives on the economic outlook at the sectoral level appear to confirm that. The decline in service activity in Sweden between February and April, although significant, was much less than among European peers.
Swedish manufacturing, which is export-oriented, has also been hit hard: the fall in the manufacturing PMI in Sweden that started in March was in line with what other European countries are experiencing. This reflects a drop in external demand as well as supply chain disruptions, which are not determined by the country’s own containment policy.
Together, these factors, and the relatively large fall in employment in recent weeks suggest the containment strategy may affect quarterly GDP growth rather than the outcome for the year as a whole. Most forecasters agree that Sweden will face a severe recession this year.
Was It All Correct or Was It All Wrong?
“I think there is potential for improvement in what we have done in Sweden, quite clearly,” Anders Tegnell of the Public Health Agency told Swedish radio.
“If we were to encounter the same disease again, knowing precisely what we know about it today, I think we would settle on doing something in between what Sweden did and what the rest of the world has done,” said Tegnell, considered the architect of the unique Swedish pandemic approach.
Authorities in Sweden, including Tegnell, have been criticized – and have apologized – for failing to protect the country’s elderly and nursing home residents.
But Tegnell said that it was still unclear what the country should have done differently. He also said other nations are unable to tell exactly what measures affected the outcome of their outbreaks because they threw everything at it in one go.
Norway’s Public Health Chief Frode Forland said that Sweden got caught up too much into historical models of viruses. Tegnell’s predecessor Anika Lindy, said that Sweden’s response was all wrong. According to her, Sweden should have announced an early lockdown and care homes should have been sealed. They should also have been more intensive in testing and tracing.
The moves recommended by Tegnell have made Sweden a bit of a local pariah and didn’t spare the Swedish economy. More than 76,000 people have been made redundant since the outbreak began and unemployment, which now stands at 7.9%, is expected to climb higher.
Finance Minister Magdalena Andersson has said Sweden’s economy, which relies heavily on exports, will shrink 7% in 2020 and the Scandinavian country was headed for “a very deep economic crisis.”