Coronavirus pushes Gothenburg into a recession
The ongoing corona pandemic has brought the world’s economy to a standstill. The effects are clearly seen even locally. In the Gothenburg region, unemployment has increased as the number of redundancies rises, shows Business Region Göteborg’s second Economic Outlook report of 2020.
The weak global growth has hit the region’s export-intensive business community hard, as demand for products has fallen. But the impacts reach far beyond export companies. The overall economic tendency indicator for the region’s business community for March and April was 60.9.
“This indicates that the Gothenburg region has officially gone into a recession. At the same time, we should remember that all countries and regions have been hard hit by the pandemic and that Sweden hasn’t been in a total lock-down, which may give us a better starting point compared with other countries. But in any case, we are heading into tougher times and this will show in the labour market in the future,” says Henrik Einarsson, director of business establishment and investment services at Business Region Göteborg.
Real GDP growth forecasts for 2020 (2021)
- Sweden: -6.4% (3.9%)
- Eurozone: -8.0% (5.6%)
- World: -3.5% (5.7%)
Unemployment on the rise
The unemployment rate continues to rise and in May was 7.5 per cent (+2.2%-points) in the Gothenburg region and 8.4 per cent (+1.8%-points) for Sweden as a whole. In the Stockholm and Malmö regions, unemployment was 7.8 per cent (+2.1%-points) and 11.1 per cent (+1.6%-points) respectively.
“The development we are seeing is the combined effects of the previous slowdown and the corona pandemic, which has eased the demand for labour significantly. Our assessment is that unemployment in the Gothenburg region will continue to rise until at least the end of the year,” says Peter Warda, analyst at Business Region Göteborg.
The number of redundancies being announced in the Gothenburg region has increased rapidly. During the first four months of this year, 9,200 people were affected.
At the same time, the number of people who are on the short-time work allowance programme is increasing. As of 29 May 2020, over 125,000 people have taken part in the programme and had their hours reduced.
“The short-time work allowance programme can mitigate the increase of redundancies for the moment and for some time to come. But if we look at the county, one-sixth of all people employed are on the programme. This means that the utilisation of labour resources is very low and that we will almost certainly see higher unemployment in the future,” says Peter Warda.