While GDP growth this year is forecast to be moderate, around 1.5 per cent, growth in both 2004 and 2005 is expected to be appreciably higher, approximately 2.5 per cent. So growth in coming years is anticipated to be somewhat higher than the potential growth we had forecast for Sweden in recent years. If Swedish economic activity is to rise as forecast, there will need to be a pick-up in investment. This began to fall as early as 2001 in manufacturing, and the following year it declined in the whole economy. Like many other forecasters we viewed the decline in investment as more transitory than it later proved to be. A year ago, our forecasts pointed to a turnaround at the beginning of 2003 (see Chart 3). In the June Inflation Report, it was forecast that investment would be delayed and begin to rise at the beginning of 2004. During the second quarter this year, gross capital formation fell by approximately 2 per cent according to the National Accounts. And in its latest forecast from August, the National Institute for Economic Research expects an increase in investment to be delayed further. The situation is clearly uncertain, even if the fundamental conditions for a rise in investment are good, with low interest rates, stable equity market growth and expectations of a recovery in the international economy. Another source of concern is connected with Swedish household consumption.
And it is this trend that determines our welfare! So we must now shift our focus in the public debate from monetary policy and stabilisation policy to issues that determine Sweden's ability to create growth and welfare. In fact, this has been important for a long time since Sweden suffered a considerable decline in welfare terms relative to almost all other countries, especially during the 1970s and 1980s. But it is particularly significant now in the light of the challenges facing us in the near future, particularly as a result of our ageing population. Essentially, economic growth is determined by how much we work and how productive we are. Nothing can change this. The number of hours worked is affected by a large number of factors; e.g. the number of people of working age, the number of these that are employed, absenteeism, etc. Labour productivity, measured as GDP per hour worked, is partly dependent on technological advances (e.g. more modern machinery) or on real capital being supplied (a long-term expansion of the means of production). In addition to this are changes in productivity that result from the movement of labour from less productive to more productive sectors. The number of hours worked grew relatively favourably for a number of years after the crisis at the beginning of the 1990s. But it was essentially demand-driven. There were many people of working age who were unemployed after the crisis years and then found employment.