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- 15 -    TFD/PC/183 Part II

15b. C ONSIDER ATION OF THE SITUATION OF^SWEDEN *

For this stiidy ^fctho Board had boforc it the country chapte-r prepared by the Economlc Cofnmittee for its annual report, It-also heard-Mr, FAY (Secretariat) who summarised the main aspects of the trend of the economlc situatlon in Sweden and indicated the conclusions reached by the Committee,

Over the greater part of 195^ and the firat six raonths of 1955, the growth in actlvity .reached an annual ratę of 5# to 6%, This increase ln the level of internal activity, particularły in investment, brought about a marked increase in imports, especially imports of eąuipment and primary metals, Despite an expansion of 9# in the volume of exports, the trade balance at the end of the first six months of 1955 showed a deficlt of $190 million as against $ll6 milllon for the first six months of 195^# There was* a slight deterioration in the balance of current payments.    •    •

Internal financial stability was raaintained up to about the end of 195^ > but in-the summer of that year the Government embarked upon a policy designed to restraln demand. Restrictive monetary tneasures were introduced, These, however, proved inadeąuate for glowlng down the ratę of generał expansion and in the opring the employers granted a fairly substantial wage increase, which forced the Government to introduce further restrictive measures to keep demand within the limit of availabilities, The policy of credit restrictions was intensified:    the Central Bank¹s discount ratę was raised from

2.3>A^ to 3,3/^‘a in April, 1955; a new large. Governnent loan was placed on the:market; private savings were encouraged by a system of special bonuses; the tax on industrial and commśrcial profitS was increased,    5

The effects of these mcasures had now begun to be felt,

The Volume of commercial credit granted by the Banks fell -considerably in June and July and there was now some shortage-of credit in certain sefctors.    Numerous building projects *’

had had to be postponed, Ne/ertheless, in September, the Central Banks gave further dlrectives to the commercial Banks, to limit morę severely the granting of credit With the exception of credit to the building industry. In addition, the Government proposed to the Swedish Parliament that the investment tax and the tax on purchaoes of motor-cars should be maintained in 1956*

In the third ąuarter there was a felight fal] in imports, particularly in the case of motor-cars, Exports continued to increase rapidly and were now 9>- higher by value than in