We can note that economic activity in the rest of the world, not least in the United States, weakened appreciably in the first half of this year. The Swedish economy has been affected by this, as is evident from Statistics Sweden’s latest quarterly GDP data. The most recent figures for the national accounts are admittedly preliminary but the tendency behind them is clear: GDP growth fell back from an annual rate of 3-4 per cent in recent years to just under 2 per cent in the first half of this year. Thus, the world economic slowdown has helped to bring about a downward adjustment of demand growth in Sweden towards the long-term path without the Riksbank needing to lift the repo rate up to between 6 and 7 per cent, as the central banks in a number of other countries have been obliged to do. How does the krona come into it? But it is not only the interest rate that influences the development of demand and ultimately the rate of inflation. The exchange rate also plays an important part. Among other things, a weak exchange rate tends to stimulate exports and other segments of Swedish production that are exposed to international competition. That could limit the impact of an international economic slowdown. Conversely, an appreciation of the krona can act as a brake and modify the pull from an economic improvement in the rest of the world.
Swedish firms that are dependent on exports have been hit in particular, along with their suppliers. At the same time it should be noted that Swedish households, who account for around 50 per cent of demand, have lowered their consumption. Like their counterparts in the United States, people in Sweden have reduced their expectations about future income and wealth. Infrequent purchases, such as cars and household appliances, have fallen in  4  BIS Review 72/2001  particular. Sweden has been hit by the global slowdown in technological sectors such as IT and telecom; firms are being compelled to undertake structural adjustments and close down some production capacity. But although Sweden is affected more than other countries, on account of the dominance of IT and telecom firms, compared with earlier downturns the situation still looks relatively favourable, at least so far. The important thing now is to look to the future. It is not the most recent economic figures that determine the course of events and it is not entirely clear what conclusions should be drawn with regard to developments in one to two years' time. One thing that is clear, however, is that resource utilisation this year will be slightly lower than economic analysts have been counting on. If it turns out to be true that GDP growth only reaches a figure of just under 2 per cent this year, this will nevertheless be a fairly creditable result for the Swedish economy.