Do you have cash?
According to Arturo Arques, a private economist at Swedbank, paradoxically, a pandemic year has left many people in Sweden in a better situation.
“In 2020, many people were still employed and had not spent as much as they normally would, due to all the restrictions. Many people have more money today than a year ago. They have bigger savings, ”he told The Local.
This is even before the changes in taxes, wages and prices that, according to his analysis, will leave most households with higher disposable income this year, compared to 2020.
According to Swedbank’s 2021 home economics On paper, those living in rented homes have outperformed those who bought a property recently, due to the 13 percent appreciation in home prices last year, changes in the top unemployment rate have helped middle-income people who have lost their jobs, while students are less well off.
According to the bank’s analysis, a person living alone in a rented one-room apartment had 200 SEK more to spend per month in real terms this January than in the same month of 2020, a family of two children and double income. A family in a rented apartment had 150 more crowns to spend. If your children are over 16 years of age, the figure rises to 630 kr.
For recent buyers, the outlook is less rosy, as rising house prices mean that 1,170 kroner will be worse off than they would have been in January 2021.
“We have rapidly rising house prices, and whether that trend continues or slows down it will have a huge impact on a lot of people,” said Jens Magnusson, a private economist at SEB bank. “A big downside to the housing market that we’ve seen in recent years is that a lot of people are foreclosed because they just can’t afford it.”
With Swedish student loans and housing allowances virtually stagnant last year, students will have 140 kronor less per month this year to spend in real terms. A miserly increase in the guaranteed state pension has also left the poorest pensioners 220 crowns worse off for a month.
For the unemployed, the situation has improved somewhat, given the increase in A-kassa’s maximum monthly payment from 20,000 to 26,400. However, this will only help those for whom 20,000 represented less than 80% of their previous salary.
Will wages go up?
The pandemic has given employers, both in Sweden and internationally, good reasons to suspend pay increases, and for some time the slow rate of pay increase has been a concern in Sweden.
“The Riksbank [Sweden’s central bank] I’ve said repeatedly that wages need to go up more for us to have a better-functioning economy and higher inflation, ”Magnusson said. “Obviously, during the pandemic there are negative growth rates in many countries in Europe, and that has not been good for wages. But when we are in recovery, perhaps in the second half of this year and through 2022, that should be a good time to increase wages. ”
What tax changes will benefit people?
Last year’s tax cuts effectively lowered Sweden’s top marginal tax rate from 57 percent to around 50 percent, saving the highest earners tens of thousands of crowns. This year, the biggest tax change applies to income earned by retirees who take a part-time job.
“We have seen tax cuts for retirees and certain groups,” Magnusson said. “If you are a retired person who works, who are the ones who benefit the most, it can be a little more than 1,000 crowns a month. Nowadays, in Sweden, if you are over 66 but still working, you pay very little taxes and you keep a large part of your income ”.
However, he said that when looking at the economy as a whole, these tax cuts were “too moderate to really matter.”
What will happen to the Swedish crown?
Many foreigners living in Sweden have savings or even receive their salary in another currency, which means that their purchasing power can change dramatically due to currency fluctuations.
The Swedish krona has depreciated against the pound, dollar and euro since around 2011, thanks in part to negative interest rates from the Riksbank. But in 2020, that trend was reversed, decreasing the purchasing power of those who paid in these currencies.
Magnusson said he believed the rise of the crown had to go further.
“Our view is that although the Krona has appreciated, it still has a long way to go,” he said. “Obviously, if we go back to a confused situation where vaccination doesn’t go as planned, or we have mutations of the virus, then we know that the Swedish krona and other small coins are generally abandoned on the FX. [currency exchange] market. But if things progress as we think and we have an economic recovery this year and next, we believe that the crown will appreciate slightly ”.
Arques said that the successful management of the economy by the Swedish government before and during the pandemic suggested that the crown would continue to increase in value.
“Because of the way the government and the central bank have run the economy here in Sweden, we have not suffered as much as many other countries, and that is one of the reasons why the crown is quite strong compared to where it was one or two years. behind. And if you look at how the economy looks in Spain, Italy, France and England, there is a good chance that Krona will remain quite strong. ”
Will inflation return?
The huge $ 1.9 trillion stimulus package recently approved in the US and other similar packages in Europe have led some to worry that the world economy may start to see inflation once again which was a big hit. problem in the thirties, seventies and eighties.
Neither Arques nor Magnusson believed this would affect Sweden in 2021.
“This is a problem that has come up now for the first time in a long time. We are talking about inflation risks again, ”Magnusson said. “There are some concerns that the US stimulus package could be too big, and maybe too late, so maybe it kicks in when the economy is already recovering and that could in itself cause inflation.”
But he said there were enough deflationary pressures in Sweden to keep short-term price increases in check.
“We don’t see it as an immediate threat, especially not in Europe or Sweden, because there are many other things that are working in the opposite direction, so it is not the most important thing,” he said. “I don’t think households should withdraw their money from the stock markets or try to protect themselves from inflation.”
Will we see a waste of spending after the summer?
Arques believes that the repressed desire to travel or go out to eat will see an increase in spending once the pandemic is over long enough for restrictions to be lifted around the world.
“I think that people who have not lost their jobs and who during the pandemic have not been able to spend as much as usual, will probably increase their expenses when the restrictions are lifted,” Arques said. “I think they will start traveling as soon as possible. And people with modest or good salaries who used to go to restaurants, will also start doing it as soon as they can. “
George is Digismak’s reported cum editor with 13 years of experience in Journalism