Swedish handling of economic crisis praised by IMF

IMFBoth the Swedish central Bank and government have been praised by the International Monetary Fund (IMF) for their management of the ongoing economic crisis.

However, the IMF also warned Sweden that the outlook remains uncertain, suggesting that the Riksbank should pursue a “gradual and cautious” cycle of tightening in relation to raising the repossession rate. The IMF added that growth fears in Sweden had been compounded by the current European debt crisis.

The Local reports that Peter Doyle, who headed the annual IMF review of the Swedish economy, heaped praise on the government and Riksbank. When asked if the situation could have been handled better, Doyle replied, “I believe that the answer is no, despite there having been a huge economic shock. The government has allowed the budget surplus to turn into a deficit in order to keep demand up and the Riksbank has kept interest rates down,” he added.

The IMF further welcomed the Financial Supervisory Authority’s proposal for a mortgage cap of 85 percent of the property price, which was seen as providing insurance against unwelcome consequences.

Doyle also urged Swedish authorities to consider the current turmoil being played out across Europe at their next meeting. “It’s hard for anyone to assess what the worries involve, but it is definitely something one should consider,” he said. “However, it is possible that the situation will be clearer in July. We think the Riksbank’s interest rate path is otherwise a reasonable path on the basis of developments in Sweden.”