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Sweden slashes 2012 growth forecast

Sweden slashes 2012 growth forecast

Published: 16 Apr 2012 15:39 GMT+02:00
Updated: 16 Apr 2012 15:39 GMT+02:00

The Swedish economy is set for a major slowdown in 2012, according the spring budget presented on Monday by finance minister Anders Borg, who warned for the "downside risks" amid the continued economic uncertainty.

Borg told reporters at a press conference that the Swedish economy had stabilized somewhat in recent months and that he expected a degree of normalization during 2012.

"But the situation is still uncertain. It's a bit like the weather in April," he told reporters.

The government slashed its 2012 growth forecast in the spring budget from 1.3 percent to a mere 0.4 percent due to "problems in the public finances of several euro[zone] countries".

Despite the much-reduced growth forecast, the finance ministry warned further that "there is still a risk of poorer growth".

As a result, Borg explained that the government planned to emphasize stronger safety margins ahead of new reforms.

"The government continues to put jobs and welfare first. Apart from managing the direct consequences of the debt crisis, the government needs to tackle the challenges facing Sweden," Borg said in a statement.

"This requires measures to achieve permanently higher employment and lower equilibrium unemployment, more robust welfare, better conditions for business and a more sustainable climate."

While the Swedish economy is expected to grow at a rather meager rate in 2012, the government expects economic growth to pick up considerably the following year, with GDP growth expected to climb to 3.3 percent in 2013 before reaching a 3.7 percent annual growth rate in 2014, just in time for the next parliamentary election.

Unemployment, meanwhile, is expected to peak at 7.8 percent on 2012, before dropping slightly to 7.7 percent in 2013 and 6.9 percent in 2014.

"Considering what had been feared, this is a little sigh of relief," said Borg.

But the forecast was criticized by some analysts as being too optimistic.

"I think it's an appropriate forecast for 2012, but a strange forecast for 2013. It seems inappropriately high," Cecilia Hermansson, the head economist at Swedbank, told TT.

"There are big problems in Europe which aren't going to be fixed in a year. There are few other forecasters that have such strong growth."

Hermansson also questioned Borg's unemployment forecast arguing it was likely to remain high for "several years" and that the government should have devoted more money to infrastructure and employment programmes.

During a parliamentary debate following the unveiling of the budget, Borg answered criticism that the government's budget did too little.

"It would be careless in this situation to have a discussion about spending cuts and tax hikes," he said.

"We can't be sure that the crisis won't come back. We should be careful, we should create safety margins."

But Social Democrat MP Fredrik Olovsson emphasized that employment issues are what matter to voters.

"The spring budget doesn't provide much hope. The government's policies are going to lead to persistent high unemployment," he said, adding that around 400,000 Swedes are out of work.

Meanwhile, the Green Party's Per Bolund attacked the government for failing to tackle youth unemployment.

"Instead of a finance minister, we have a statistics minister who seems more interested in explaining away unemployment than doing something about it," he said.

TT/The Local/dl

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Your comments about this article

16:31 April 16, 2012 by Svensksmith
Borg looks like he's really enjoying himself in that picture... Where's his hands?
17:12 April 16, 2012 by libertarianism
Wonder why he doesn't wear giant black glasses like all the other Clark Kentssons. Maybe he's more of a Harry Potter kind of guy? Re 1, holding his wand?
18:28 April 16, 2012 by Carbarrister
He may need to sell his earing if things get worth.
18:40 April 16, 2012 by kirub
Senor Borg, what's with the grey hair?
19:31 April 16, 2012 by PeterGr
Not entirely sure with his projections, but it certainly seems he got spooked by the trouble still brewing in the Eurozone and the PIGS in particular. He may be thinking that money should be put aside for additional rescue packages to other EU member states...
19:37 April 16, 2012 by libertarianism
Oh, thank you #3. That made me laugh. Poor Borg. I hope I never end up in a TL story. The things people say... ;)
20:24 April 16, 2012 by viennacalling
I would like the ECB to release all the data on the 1 trillion EURO Loans given to All the EU Banks . The Top 4 British Banks have Confessed to taking Over 50 Billion Euro, How Much did the Swedish Banks Take and convert to Kroner ???
07:51 April 17, 2012 by Happy Expat
400,000 Swedes are out of work but how many more would it be if they published the figure for ALL unemployed. We've already had Rumpfelt telling us that the "others" don't really count,
12:53 April 17, 2012 by jasonpat
This is well growth by the swedon this hard time.
15:13 April 17, 2012 by minzi
Actually I dont understand that why one government which owns thinktanks cannot figure out the simple way to solve the current financial problems and unemployment probles and so on which for the ordinary people like me have got some thoughts to tackle with. But without the goverment determination to solve the problems, we cannot expect the problems will be worked out by themselves. So why doesnt the goverment actually do something?
16:55 April 18, 2012 by Thebinary1
@minzi: As long as problems exist, governments remain relevant and politicians get to have and keeps their jobs. As soon as problems are solved, governments and politicians become irrelevant and therefore jobless. It is therefore not in the government's interest to solve problems. This is why when they need your vote, they suggest really good policies on solving problems, but once in power they consistently fail to deliver.
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