We make it clear in the Inflation Report that we consider the risks of a poorer development in Swedish and international economic activity to have declined as the recovery has progressed. Experience also shows that it is easy to underestimate the force of an upturn once it has found a foothold. Developments in the labour market in both Sweden and the United States are one factor pointing in the other direction. In addition, developments in the euro area remain sluggish and in the United States there are problems with imbalances in foreign trade in particular. Our opinion is nevertheless that, compared with the picture we present in the main scenario, there is an upside risk for inflation from economic activity in Sweden and abroad, with links to price trends. There are arguments that we could have either overestimated or underestimated cost pressure. Compared with the December assessment, we have revised up our basic view of productivity, although there is considerable uncertainty in this area, given the surprising developments over the past six months. On the other hand, the uncertainty regarding wages has diminished somewhat, as central wage agreements have now been concluded for a large part of the labour market. All in all, our assessment is that the risks in this field are balanced.
Let me name a few – 1) sovereign is no longer risk-free, 2) we are taught to value economies of scale but are now confronted with the too-big-to-exist problem and 3) banks should no longer be only international in life but also in death as crises are more and more systemic given the growing interconnectedness. Spillover and contagion were witnessed in 1997 where the turbulence spread from Thailand to South East Asia and to Russia, China and Brazil, as it was a decade later in 2007 where the crisis widened from US and EU to the rest of the world. Imagine the pace of the spread of crisis in the next 10 years in 2017 – where crises would grow in size and speed beyond the management capacity of a single nation, real collective action is called for. Most importantly, we have to be forward-looking and well prepared. As crises are prone to occur more frequently with larger spillover, reform must be continued during normal times. It is imperative that the public is on board and support the reform effort to raise the competitiveness of the country, and minimize vulnerabilities or imbalances that may be triggered by external factors through no fault of their own. Ladies and gentlemen, Let me conclude by offering an observation that in 2002, five years after 1997 crisis, Asian economies had fully recovered, in particular, Thailand was able to repay the IMF package some two years ahead of the schedule.