ahead, the rate of growth can still be expected to accelerate in the world economy and in swedish export markets. developments in equity markets also indicate expectations of a continued strengthening of economic activity in the period ahead. the rise in equity prices around the world, which began in the spring last year, has continued. at the same time, long - term international interest rates have fallen recently. it is difficult to determine how much of this is due to lower optimism about growth in the coming years or if it perhaps is more indicative of lower expectations of inflation. looking ahead, there is reason for some concern regarding developments in long - term interest rates, partly against the background of the weak us public finances. upswing also evident in sweden, but the picture is not entirely clear with that, i am now ready to discuss the swedish economy. allow me to begin by noting that the swedish economic outlook last year changed in approximately the same way as internationally. during the first half of the year, the economic outlook became increasingly pessimistic. in sweden, it was mainly investment that was weaker than expected. the weak economic activity was also reflected in the riksbank ’ s forecasts of inflation. this in turn was a contributory factor in the riksbank ’ s decisions to cut the repo rate on three occasions for a total of one percentage point. during the latter part of the year, however, the outlook became somewhat less pessimistic. in sweden, the weak investment was countered by favourable growth in consumption, both private and public, and a rise in exports. the assessment at the end of the year was that growth had increased gradually in 2003 and would reach 1. 5 per cent. growth in 2004 and 2005 was forecast to be approximately 2. 5 % both years, which on the whole is somewhat faster than what the riksbank considers to be possible in the long term without giving rise to inflation. new swedish data support this scenario, but the picture is still not entirely unambiguous. the national accounts for the third quarter showed higher growth compared with previous quarters. household consumption also rose, as did exports. at the same time, business tendency data are indicating growing optimism among firms during the latter part of the autumn, while retail sales continue to grow at a historically high level. but growth in industrial production was relatively weak in october and november while there was a reduction in the number of new orders. moreover, new estimates of the public finances indicate that public consumption this year may

be somewhat weaker than assumed in december. this is mainly due to the financial situation of municipalities. the municipal sector as a whole is running a deficit, which must be redressed in the years ahead. one issue that has been debated recently is the effects on the swedish economy of the weaker dollar. it is true that the dollar ’ s performance has been weak, but this is not the whole picture. in tradeweighted terms ( tcw ), the krona has not strengthened recently. this is mainly because the krona quite contrary to what many had expected - rather has weakened slightly against the euro. so for foreign trade as a whole, the currency developments should not constitute any great problem. another issue of course is if the weaker dollar, primarily in relation to the euro, could jeopardise the revival in the world economy. neither does this appear likely as long as the adjustment is fairly orderly. as i mentioned earlier, it is probable that growth in europe will be slowed down somewhat, but on the other hand it is likely to be more robust in the us. moreover, the most recent data for the national accounts and foreign trade indicate that we so far rather have been slightly too pessimistic about swedish exports. the most palpable concern is the labour market, where growth has been weaker than expected particularly towards the end of 2003. employment was indeed somewhat higher in 2003 as a whole than we expected at the beginning of the year. but this was primarily because the unexpectedly robust growth in the public sector countered weak growth in the private sector. we have no reason to expect any such pattern during 2004. the strained financial situation in the public sector points to weak employment growth in the public sector, while the economic upswing is likely to be reflected to a rather small extent in a rise in employment during 2004 in the private sector. of course there is a risk that the weak labour market growth will affect households ’ expectations of the future and propensity to consume, which is a risk that we highlighted back in december. the higher the rate of unemployment, the more cautious households are likely to be when it comes to purchasing and consuming. this in turn could entail a risk of lower growth in 2004. nor as regards domestic economic activity is there now reason to make any large revisions compared with our assessment in december. a number of factors are indicating possibly weaker growth, but at the same time there are factors that are pointing in the opposite direction. compared with the picture we had in