Sweden goes to the polls on Sunday to elect a new government in a vote that many commentators believe is the most contentious in decades.
By – Will Martin
The election is likely to see a strong performance from the Sweden Democrats, a right-wing, anti-immigration party with historical associations with the country’s neo-Nazi movement. It is expected to finish among the top three parties, and could find itself with some representation in the country’s government.
Like many anti-immigration parties in Europe, the Sweden Democrats are highly Eurosceptic, with its leader Jimmie Åkesson frequently arguing that the country should hold a referendum on whether it should remain or leave in the European Union.
While a referendum is probably a long way off, it is now not impossible that Sweden could hold a vote for a so-called Swexit from the EU.
“Although the option of leaving the European Union (EU) does not hold majority support amongst the Swedish population,” a report from Oxford Economics this week said, “the topic has garnered increasing attention since the Sweden Democrats announced their intention to hold a referendum on membership after the 2018 general election.”
But what would Sweden, the EU’s seventh-largest economy, leaving the EU actually mean economically?
Like the UK, Sweden is somewhat peripheral to the EU. It is not part of the continental mainland, and is not part of the euro. Nevertheless, it would be a major event for both the nation and the EU as a whole.
Oxford Economics’ report made clear that the possible outcomes surrounding Swexit are hugely unclear, but based its assumptions on Sweden voting to leave, before ultimately pursuing a most-favoured-nation relationship with the EU while trading on World Trade Organisation rules.
It also assumes Sweden triggering Article 50 — the mechanism for leaving the EU — in 2019, leading to a leaving date of 2021.
Slower growth, lowered migration, higher unemployment
The long and the short of Oxford’s forecasts, which are based on a ten-year span to 2031, is that things would not be good for the Nordic nation.
“In the Swexit scenario Sweden’s real GDP declines by 4.0% in real terms compared to our baseline forecast in which Sweden remains a member of the EU,” the report, compiled by Henry Worthington, said.
Not only would Swexit lead to slower GDP growth going forward, it would also lead to lowered migration, the report said. That, in line with weak growth, would see unemployment increase significantly, the report said.
“In our baseline forecast employment is projected to grow at 0.16% per year during the scenario horizon, a rate which drops to virtually zero in the Swexit scenario,” Oxford Economics wrote.
“As a result, the Swedish economy supports 73,000 fewer jobs in 2031 compared to baseline a decline of 1.4 percent.”
Household finances would also suffer, losing a cumulative 30,300 krona on average in the 10 years after Swexit, equivalent to around $3,300.
There would also be positives, however, thanks to the fact that after leaving the EU “Sweden would no longer have to contribute to the EU budget, freeing up fiscal resources to finance investment in public services or tax cuts.”
Here’s the key extract:
“As a relatively high-income member, Sweden has consistently been a net contributor to the EU budget, a pattern can be expected to continue going forward. In total, we forecast that Sweden’s net contribution during the scenario horizon would total €51.3 billion.
“Despite an assumed ‘divorce bill’ of €24.3 billion this still yields a fiscal dividend of €27.0 billion equivalent to 0.4 percent of GDP over the scenario horizon.”
Read more: From 2018/09/10