Sweden GDP collapsed by 8.5% despite no lockdown
When Covid began to spread, Sweden chose a less restrictive strategy than most other countries, never imposing a lockdown. Day-care centres and elementary schools remained open. The Public Health Agency limited itself to recommending social distancing, working from home, and avoiding unnecessary travel. In media interviews, representatives of the Agency even criticized employers who quarantined returning staff from risky areas. Only recently the Agency recommend that people should quarantine themselves if someone in their household is infected.
From an economic point of view, like other countries, Sweden suffered a lot. GDP decreased by 8.5% in the first half of 2020. The decline in GDP is smaller than that of southern European countries and the United Kingdom. However, it is higher than in Finland and Norway. It is not easy to assess the impact of different strategies using this metric, due to the economic differences of countries. For example, Sweden depends less on sectors particularly affected by the pandemic, like tourism.
The Swedish strategy also had a high impact in terms of lives lost. Sweden is recording an extremely high death rate compared to other Nordic countries. The number of deaths per million people in Sweden is around 581, slightly lower than 673 in the United States, but significantly higher than 52 in Norway, 64 in Finland and 118 in Denmark.
According to some analyzes, the economic gains from the lack of restrictions were not worth the cost. Assuming that the Swedish approach dampens the GDP fall this year by 1%, the gain would be $5.6 billion. Assuming also that the approach caused 5,000 more deaths, and that the value of a statistical life is about $4.6 million (value set by the Swedish transport administration), the cost of lives lost would reach $22.9 billion. This means that the life value should be extremely low for economic gains to outweigh human losses (less than $1.12 million).
Even with a lenient approach, Swedish GDP has dropped a lot, despite the absence of restrictions and despite it does not depend much on the sectors most affected. The Swedish approach does not seem to have been entirely optimal. The death rate is extremely high, and the economy is not performing well. Sweden’s decision to take a cautious approach has resulted in an high number of deaths, without fully protecting the economy.
We believe that the approach taken by most countries is correct. They probably could have done more, with a better organization in the face of the previous months experience. We hope that in the short term governments will be able to support the economy weakened by the new lockdowns arriving. However, we remain convinced that the measures implemented by the institutions are exceptional, and that in the medium term this will represent a great support for the economic recovery.