Sweden has released growth figures for the second quarter – a contraction of 8.6 per cent – and two narratives are circulating. The first is that the Swedish experiment has failed spectacularly, resulting in both a higher death toll than its Scandinavian counterparts as well as a collapsed economy. The second is that Sweden has been vindicated, taking a much less severe economic hit than the EU’s average and in a better position to recover as well. Which is the fairer assessment?
Sweden has indeed taken an economic beating despite never instigating a full lockdown. Its population’s change in behaviour (adopting social distancing and heading indoors despite this not being dictated by formal rules), combined with every other major economy around them shutting down has spiralled the country into a recession, along with the rest of Europe. Sweden’s economic downturn also goes much deeper than other countries, like Hong Kong, which also avoided a full lockdown (though arguably much of Hong Kong’s economic pain has already been felt, having contracted 5.5 per cent in Q1 and now into its fourth quarter of negative growth).
However, Sweden has fared substantially better than the EU average of 11.9 per cent, with France’s economy down 13.8 per cent, Italy down 12.4 per cent and Spain down a staggering 18.5 per cent. The difference of a 3.3 per cent contraction between Sweden and the average is hardly splitting hairs, let alone the gap between Sweden and Spain. We’re talking billions of pounds disappearing out of economies, the effects of which could last for years as countries struggle to grow the their way back to pre-Covid levels.
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