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ECONOMY

Sweden’s economy ‘to grow faster than expected’

The Swedish economy will grow by more than expected this year and next year, the government has predicted, while unemployment will fall.

Finance minister Anders Borg said on Friday that the Swedish GDP will grow by 3.7 percent this year and 3.3 percent next year. In October’s budget he had predicted growth of 3.3 percent for this year and 3.1 percent next year.

Borg said unemployment would fall from 4.7 percent to 4.1 percent between 2006 and 2007.

Tax cuts and and spending increases in some areas would be possible, said Borg following ministerial negotiations at Stockholm’s Haga Slott on Friday.

One area likely to get more money is migration, with Migration Minister Tobias Billström’s department hacing to deal with an increasing number of asylum seekers. The Swedish Board of Migration has said it will need more staff to be able to carry out its duties.

Borg would not say how much room for manoevre he would have in his budget, nor would he reveal any specific plans to be included in the spring budget, due to be presented on 16th April. He did, however, say that he believed that current economic conditions would allow a further tax reduction on earned income to be introduced in January 2008.

“But that is on the condition that the prognoses turn out to be correct,” he said.

Despite the promising economic signals, Borg vowed to hold tight on Sweden’s pursestrings when ministers come asking for extra cash. High growth rates need to be managed in order to last, he argues.

The government’s spending priorities are creating jobs and better conditions for entrepreneurs. Among the planned programmes are the ‘job and development guarantee’, under which people who are long term unemployed will be given help to find work while at the same time doing work in the community.

The increase in the growth prognosis is due to a number of factors. Employment rates have been rising unexpectedly fast, households’ disposable incomes have been increasing and international growth is stronger, the government says.

ECONOMY

Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.

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