real economy and inflation would be considerably more limited than what proved to be the case at that time. the assessment of most analysts today seems also to be that the increase in the oil price in 2004 could indeed curtail somewhat the international economic upswing but that the recovery will not be derailed. the impact of the oil price on inflation, too, should be less than before. since the oil price shocks in the 1970s there has been a shift in the economic policy regime in many countries which has meant that low, stable inflation has become one of the central targets of economic policy. today, low - inflation policies seem to enjoy high credibility in most countries, which is indicated in part by the fact that the rise in the oil price at least so far has had small effects on inflation expectations. the risk of an oil price rise spreading to wages and other prices in the economy is therefore also likely to be low. furthermore, in the case of sweden it should be added that inflation is rising from a low level and that agreements in the labour market have been settled for 2005 and 2006, further reducing the risk of contagion effects via the jobs market. to sum up : the fact that the increase in the oil price is partly a demand - driven phenomenon, that the dependency on oil has decreased and that inflation - targeting regimes enjoy high credibility suggests that the higher oil price should mainly be reflected in a temporary, limited rise in inflation and that the effects on the real economy should be fairly small. if this is correct, the general economic and inflationary developments are more significant for monetary policy than developments in the oil price. this brings me to a discussion of the broad outlook for the swedish economy in the years ahead. economic activity in sweden despite the riksbank ’ s relatively optimistic outlook for the swedish economy compared with other forecasters, we have gradually revised up our forecasts in the past year. our assessment in may was that economic activity in sweden would continue to strengthen in the period ahead owing to both relatively loose monetary and fiscal policy and an expected economic upswing abroad. gdp growth was forecast to average almost 3 per cent from 2004 to 2006. one reason that there now is cause to revise up the growth forecast is that exports once again have increased unexpectedly fast. export growth has been robust because international demand in general has grown more rapidly than anticipated and because the relative price of swedish exports has been unexpectedly low. as i pointed out earlier, some 20 per cent of swedish exports go to countries outside the

oecd area where economic growth has been vigorous. during the first half of this year exports of goods, measured in current prices, rose 9 per cent compared with the same period in 2003. swedish exports have also benefited in part from the revival in the it and telecommunications sectors. however, robust growth in exports is not unique to sweden ; average export growth in the eu has been roughly as strong during the first half of this year. another positive signal is that a pickup in investment, which the riksbank and other forecasters have been waiting a long time for, seems to have begun. this was a major contributory factor to our more positive outlook for the swedish economy at the latest monetary policy meeting in august. since the monetary policy meeting in august, the government and its collaboration parties have announced proposals, intended to be presented in more detail in the budget bill, which may entail a more expansionary fiscal stance in the period ahead. these proposals include cutting income tax for households, abolishing inheritance and gift tax, lowering wealth tax and increasing support to local governments. in total, this is estimated to provide a stimulus of just over sek 20 billion in 2005 and 2006. how large the impact of this will be on economic growth and inflation is not so easy to forecast. this is partly dependent on the extent to which households save their increased incomes. using traditional rules of thumb it could entail a few tenths of one per cent higher gdp growth in both 2005 and 2006. as things stand, therefore, there is reason to expect growth to average above 3 per cent in the coming two years. in spite of the fact that the economy has performed fairly well for almost two years, developments in the labour market so far have been weak. even though the demand for labour is still low, the situation is nonetheless judged to have stabilised somewhat. the historical pattern is for employment to lag behind a change in output somewhat. it is common for economic upswings to begin in manufacturing, which then results in a rise in manufacturing employment. gradually, there is also an increase in output in the services sector, which boosts employment in that sector. our judgement is that this will also be the case this time. at the same time, it is important to remember that a process of structural change has been underway in the swedish economy for some time, where jobs in the manufacturing sector have been replaced by jobs in the private services sector. this development, too, is likely to continue in