STOCKHOLM • Sweden, which has opted for a more open strategy in combating the COVID-19 pandemic than other European countries, has seen an increase in the number of deaths per capita recently, and is bracing for a recession.
Sweden has kept most schools, restaurants and businesses open during the pandemic and some theorized it might at least suffer less economic pain. But the latest data challenge that idea.
Scandinavia’s biggest economy will shrink 7 per cent this year, Finance Minister Magdalena Andersson said on Tuesday. And while overall deaths are on the decline, Sweden’s had 6.25 deaths per million inhabitants per day in a rolling average between May 12 and May 19, according to Ourworldinsata.org. That was the highest in Europe on a per capita basis and just above the United Kingdom, which had 5.75 deaths per million.
Over the course of the pandemic Sweden, which reported a total 3,831 deaths as of May 20, still had fewer deaths per capita than the U.K., Spain, Italy, Belgium and France, which have all opted for lockdowns, but the Swedes have a much higher death toll than their Nordic neighbours Denmark, Norway and Finland.
Sweden’s government has made clear its COVID-19 strategy isn’t about putting the economy ahead of lives. Instead, the top epidemiologist, Anders Tegnell, said his approach is more sustainable when tackling a virus that’s likely to be here for the long term.
Sweden’s strategy, mostly based on voluntary measures regarding social distancing and basic hygiene, has been criticized by some as a dangerous experiment with peoples’ lives but has also been put forward as a possible model by the World Health Organization.
Michael Ryan, who runs WHO’s health emergencies program, recently said, “If we are to reach a new normal, in many ways Sweden represents a future model.”
Sweden’s open strategy seems to have somewhat softened the blow on the economy, with growth shrinking much less than in Denmark and Norway in the first quarter.
However earlier this week, Sweden’s debt office revealed an historic 30-fold spike in borrowing to cover emergency spending amid record job losses. And a separate survey showed 40 per cent of businesses in Sweden’s service sector fear bankruptcy.
Andersson said her country is now seeing “a very deep economic crisis.” She also said the “deep downturn in the economy is happening faster than we expected.”
Marten Bjellerup, chief economist at the debt office in Stockholm, said he thinks Sweden will fare “somewhat better” than others, but acknowledged “the difference is marginal.”
The trade-reliant economy has been unable to withstand the global shock triggered by widespread lockdowns elsewhere.
“The economy will be constrained by the recovery in the rest of the continent given its dependence on external demand,” said David Oxley of Capital Economics.
About half Sweden’s GDP comes from exports, and some of its best known companies, such as Volvo Cars and Electrolux, have had to cut thousands of jobs as demand dries up.
For now, Sweden’s experiences suggest there might be few economic benefits to leaving an economy open during a pandemic.
Asked whether Sweden might see a quick rebound, Andersson, the finance minister, said “that doesn’t seem very likely at present. We expect a more drawn-out scenario.”
Australia central bank sees glimmer of hope as economy restarts after pandemic shutdown – The Guardian
By Swati Pandey
SYDNEY (Reuters) – Australia’s central bank held rates at all-time lows on Tuesday and sounded less gloomy as the economy gradually re-opens during what is likely to be the worst quarter since the Great Depression.
The Reserve Bank of Australia (RBA) left rates at 0.25% at its monthly policy meeting in a widely expected decision, and said the “accommodative approach will be maintained as long as it is required.”
In a short post-meeting statement Governor Philip Lowe said the RBA was prepared to scale up government bond purchases if needed to ensure three-year yields held around 25 basis points.
Australia’s A$2 trillion ($1.4 trillion) economy is experiencing its biggest contraction since the 1930s in the current quarter but “it is possible that the depth of the downturn will be less than earlier expected,” Lowe added.
A significant decline in new infections, earlier-than-expected easing of restrictions and signs that hours worked stabilised in early May auger well for a recovery.
“There has also been a pick-up in some forms of consumer spending,” Lowe added.
States and territories across Australia have been easing social distancing regulations at differing paces in recent weeks, slowly ending a partial lockdown ordered in March, having largely contained the COVID-19 pandemic.
Australia, which has about 7,200 coronavirus cases, has not reported a death from the disease for more than a week.
The country’s success in containing the virus has sent the Aussie dollar soaring to five-month highs. Yet, that is leaning against monetary stimulus and won’t be welcome by the RBA.
The central bank made no mention of the exchange rate in the statement.
Highlighting the depth of the pandemic-driven global economic downturn and the fallout on Australia, many economists expect interest rates to remain at record lows for at least two more years.
Some are even predicting negative interest rates, though Lowe has ruled it out.
“While we have also become more optimistic about the outlook for the economy in recent weeks, we still expect the unemployment rate to jump to nearly 9% by Q3,” said Capital Economics analyst Marcel Thieliant.
He expects the central bank to announce an expansion of its government bond buying programme at its August policy meeting.
“And we only expect the unemployment rate to fall below 7% by 2022. That would leave it far above the RBA’s estimate of the natural rate of 4.5%, underlining that the RBA will miss its full employment mandate for years to come.”
Q1 GDP MAY DODGE CONTRACTION
Official data out earlier showed Australia boasted a record current account surplus last quarter as firm export prices and a fall in imports provided a timely boost to growth.
Other data out on Tuesday showed government spending also added to growth in the March quarter, while companies reported better sales and profits than many expected.
The figures led analysts to upgrade their forecast for first-quarter gross domestic product due Wednesday with some saying the economy might not have shrunk in the quarter as previously feared.
GDP had been forecast to show output contracted 0.3%, the first fall since early 2011.
“A small positive print cannot be ruled out,” said Su-Lin Ong, chief economist at RBC Capital Markets.
“But the likely collapse in activity in the current quarter and accompanying impact on the labour market…is a sharp and deep shock through the whole economy with likely lasting ramifications.”
(Reporting by Swati Pandey; Editing by Shri Navaratnam)
Saskatchewan's economy was already shrinking before COVID – Regina Leader-Post
New data from Statistics Canada suggests Saskatchewan was already in a “mild recession” last year, even before COVID-19 and the latest oil shock began pummelling the province.
Saskatchewan’s gross domestic product (GDP), a measure of total economic output, shrunk from $82.2 billion in 2018 to $81.5 billion 2019 after factoring in inflation. That’s a decrease of 0.8 per cent, the worst number of all the provinces. The only other province to see its economy shrink last year was Alberta, which faced a contraction of 0.6 per cent.
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Joel Bruneau, head of the economics department at the University of Saskatchewan, said the new data shows the province wasn’t even managing to tread water before COVID hit.
“We’ve averaged negative growth over four quarters, so I would call it a mild recession,” he said.
The data shows that most of the hit to Saskatchewan in 2019 came from goods-producing industries, rather than the service sector. Industrial production was down, as was mining and quarrying, while the energy sector was basically flat.
Lockdown or no lockdown, study shows COVID-19's economic destruction followed a similar path either way – National Post
A group of economists studying how South Korea fought the COVID-19 outbreak without stay-at-home orders found that the country still experienced significant job losses in a pattern similar to that of countries that imposed lockdowns.
The study, from economists at Seoul’s Myongji University, Queen Mary University of London and St. Louis’s Washington University, also suggests that Canada’s slowly reopening economy may not go back entirely to normal as long as the virus is still prevalent.
“At most, half the job losses in the United States and the United Kingdom can be attributed to lockdowns,” the economists argue. Most job losses came from reduced hiring by businesses and a significant amount of non-participation in the labour market, rather than unemployment.
The same types of workers are feeling the effects, whether their country implemented a lockdown or not, the study claims. Less-educated workers, young people, workers in low-wage occupations and the self-employed lost were hardest hit, even when researchers controlled for industry effects that might over-represent these people.
“Lifting of lockdowns may lead to only modest recoveries in employment absent larger reductions in COVID-19 rates,” the paper warns.
The economists looked at labour-market effects in South Korea, where no lockdown was imposed, and compared the economic impact across different areas. One particularly bad local outbreak allowed the researchers to estimate that one additional infection for every thousand people causes a two to three per cent drop in local employment.
“The best way to revive the labour market is to eradicate the virus,” reads the paper by economists Sangmin Aum from the Myongji University in Seoul, Sang Yon Lee from Queen Mary University of London and Yongseok Shin from Washington University in St. Louis.
The study manages to untangle the many different factors in unemployment by concentrating on a localized outbreak in South Korea caused by a notorious event that spiked the transmission rate in the country.
In mid-February, the country had only 30 infections, but “Patient 31” attended a religious gathering in the city of Daegu. Ten days later, the country had more than 3,000 infections almost entirely clustered around Daegu. More than 60 per cent of them were traced back to that single gathering.
South Korea managed to quash the outbreak and maintains one of the lowest death rates in the world, mainly due to widespread testing, a robust contact-tracing regime and comparatively intrusive tracking measures, including monitoring quarantine-breakers with electronic wristbands.
The study is a working paper released for discussion by the National Bureau of Economic Research in the United States before peer review. Although working papers haven’t gone through the rigorous publication process, they are a timely way to compare the results of the COVID-19 outbreak around the world.
Countries that didn’t implement a lockdown have also suffered economic damage from the pandemic due to the disruptions in global travel and trade.
Sweden, which kept most schools, businesses and restaurants open after experiencing its own COVID-19 outbreak, is still expecting its economy to contract by seven per cent this year. Sweden’s exports depend heavily on demand from other countries, many of which went into full lockdowns.
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