RTTNews - The National Institute of Economic Research raised Sweden's economic outlook on Wednesday. The institute said gross domestic product will fall 5% in 2009. In June, the think tank had predicted the economy to shrink 5.4%, the worst development since the second world war.

Today, the institute said the period of substantial decreases in GDP is over. The think tank forecast the economy to grow 1.5% in 2010 compared to a 0.8% rise estimated in June. Further, annual growth for 2011 is seen at 2.9%, up from the previous forecast of 2.5%.

However, the labor market will continue to deteriorate with rising unemployment, the institute noted. An expansionary fiscal policy will lessen the effects on the labor market, especially if a large portion of the fiscal policy measures are implemented next year.

Further, the think tank said the central bank will start raising interest rates gradually in the autumn of 2010, and by the end of 2011 the repo rate will be 1.5%.

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