Sweden's Economy: Predicting is Not Showing
By David Henderson
Sweden has attracted global attention for not imposing a full lockdown, as seen in most of Europe, to contain the coronavirus pandemic.
Nonetheless, data released from the country’s central bank and a leading Swedish think tank show that the economy will be just as badly hit as its European neighbors, if not worse.
This is from Holly Ellyatt, “Sweden had no lockdown but its economy is expected to suffer just as badly as its European neighbors,” CNBC.com, April 30.
The article’s title is accurate. The second paragraph is not. The data don’t show that at all. How could they?
The next two paragraphs clarify:
Sweden’s central bank, the Riksbank, gave two possible scenarios for the economic outlook in 2020, which it said “depend on how long the spread of infection continues and on how long the restrictions implemented to slow it down are in place.” Both possible economic outcomes are bleak.
In the first scenario (scenario A in the chart below), gross domestic product contracts by 6.9% in 2020 before rebounding to grow 4.6% in 2021. In a more negative prediction (scenario B), GDP could contract by 9.7% and a recovery could be slower with the economy growing 1.7% in 2021.
So the Swedish central bank made a prediction. The prediction could be too high or too low. The odds that it’s just right are miniscule. But the Swedish central bank did not show that Sweden’s “economy will be just as badly hit as its European neighbors, if not worse.”
Everyone understands this in other contexts. I predicted in early November 2016 that Hillary Clinton would win the presidential election. I did not show it.