The IT sector is relatively large in Sweden; IT investments have been extensive; the previous phase-out of product markets has increased competition; Sweden is a small, open economy which also leads to great competitive pressure and so on. My impression is that IT will continue to contribute to a relatively rapid development of productivity in Sweden, while higher real interest rates and energy prices may subdue the rate of growth. All in all, we expect to see a lower long-term rate of increase than we saw from the mid-1990s to the mid-2000s. The current economic situation and monetary policy I will now briefly address current monetary policy. The situation can be summed up as follows: the economy is weakening, inflation is falling rapidly and the Riksbank is reducing the interest rate. The financial crisis is reinforcing the downturn in economic activity GDP growth is now declining in Sweden and abroad. We expect to see negative growth in the Swedish economy next year (see Figure 8). It is predicted that employment will fall by approximately 120 000 over the next two years and that unemployment will rise to approximately 8.4 per cent (see Figures 9 and 10). An important reason for the dramatic downturn in economic activity we see ahead of us is that the global financial crisis has worsened during the autumn. Inflation has been unusually high over the past year. But it will probably fall rapidly in the year ahead.
The argument is that the same restraining effect on wage formation could now be achieved if the service sector sets the norm rather than the manufacturing industry. The idea is that if the service sector sets the norm too high, the Riksbank would increase the interest rate and that this would dampen economic activity, employment and inflation in the same way as if the manufacturing industry set the norm too high and lost international competitiveness. The sector exposed to international competition should set the norm My own view is that the sector exposed to international competition still has a central role to play in wage formation. But this sector should not be equated with the manufacturing industry. Other sectors are also exposed to international competition to varying degrees. It is also important that there is consensus between the negotiating organisations on what part of the economy should set the norm. I do not think that there is any major difference between the previous situation with a fixed exchange rate and the present situation with a floating exchange rate. Our inflation target is largely the same as in other countries. As we saw earlier, inflation over the last 15 years has also been more or less the same in Sweden and Germany. The only way that we can have higher wage increases is if the development of productivity in Sweden is higher than in other countries.