Unemployment is expected to grow to 8.4 percent. The Riksbank estimates that the policy rate will be lowered by 1.25 percentage points during the year. The timing of the cuts is uncertain.
– We remain with the forecast we have stuck to since last autumn, namely that the policy rate will be lowered in five stages this year and for the first time in May. A little depending on how the ECB acts, the krona exchange rate and the geopolitical risks develop, the Riksbank may time the reductions a little differently than what is in our forecast, says Robert Boije, chief economist at SBAB.
He continues.
– The signals from the ECB most recently were that they do not rule out a reduction in June. If that does not happen, I think that the Riksbank, after a first reduction in May, will choose to wait with the next reduction, unless inflation plummets in May. That the policy rate should go down in total by at least 1 percentage point during the year – probably more – is, however, perfectly reasonable given how the inflation outlook looks in Sweden right now.
As housing interest rates fall and households’ real disposable income increases, housing prices are also expected to rise. SBAB predicts a moderate rise of 4 percent over the year as a whole.
– It is genuinely difficult to make forecasts about housing prices. Although much now suggests that the specter of inflation has been dispelled and the variable mortgage interest rates will therefore probably be significantly reduced in the future, one should not expect any large price increase for housing during the year as a whole. In line with normal seasonal patterns, house prices can indeed rise relatively much in the spring, but the financial statements must be made when the whole year has passed and after normal negative seasonal effects during the autumn months, says Robert Boije.
The number of new housing starts is expected to remain at 20,000 this year. Next year, the level is expected to rise moderately and production is expected to gradually increase towards 30,000 in a few years’ time. This, SBAB believes, is far below the levels that the Housing Authority deems necessary to build.
– The large drop in the number of new housing starts risks leading to a large loss of competence in construction in the coming years, lower economic growth both in the short and long term and also continued difficulties in attracting the necessary competence to not least important green growth locations. Taking into account SCB’s recently heavily revised population forecast, the problems now look a little less dramatic than previously assessed, says Robert Boije.
