Although a weaker exchange rate contributes to boosting exports, the effects are limited if international demand is low. At the same time, a weak krona provides higher imported inflation. We are expecting the exchange rate to strengthen in the slightly longer term, but to remain weak until the most acute stage of the crisis is over. To summarise in brief, we are assuming that the financial crisis will in various ways make the wheels of the economy turn much more slowly. Growth is expected to slow down both in Sweden and abroad. Our forecast is that the increase in GDP in Sweden, Europe and the United States will remain around zero next year, but recover in 2010 and 2011. The labour market, resource utilisation and inflation In that the financial crisis aggravates the ongoing economic downturn, we are assuming that the labour market will show weaker development and that inflation will be lower than we forecast at the beginning of September. Resource utilisation in the economy is still at a  6  BIS Review 138/2008  slightly higher level than normal. However, we are assuming that it will fall rapidly and be somewhat lower than normal over the coming years. Inflation is still high at the beginning of the forecast period. But during next year we are expecting it to fall rapidly. Opinion polls also indicate that inflation is expected to be lower in the future. Our assessment is that inflation will be below two per cent in 2009.
Today we are once again in a situation where such bank support authorities are being established in many parts of the world, including Sweden. We are also facing a period of poorer economic activity. But this time the situation is very different for Sweden. Experience and measures have given resilience The anxiety that has had a stranglehold on the financial markets since the end of September comes from outside this time, not from problems in the Swedish bank sector. Swedish banks have on the whole shown much more responsible credit granting, both compared with the years following credit deregulation and compared with parts of the US mortgage market. The banks have good capital buffers and can manage substantial loan losses, even if they are nevertheless affected by the general mood of distrust on the market. We are also much better equipped in many ways to meet an economic downturn than we were at the beginning of the 1990s. I am thinking here of the effects of the changeover in monetary and fiscal policy after the crisis, and the fact that we now have sound public finances and a substantial surplus on the current account. Although a small, open economy like Sweden’s is never immune to what is happening in the world economy, and particularly to an international financial crisis, we learnt a lot from the difficult years in the 1990s. This applies to the banks as well as to the supervisory authorities and the political system.