Economic upswing fills Sweden’s coffers

Moody's Investors Service said Sweden's economic upswing in the past three years has contributed to larger-than-expected fiscal surpluses, thanks to strength in income tax

receipts and indirect tax buoyancy.

Moody’s added structural surpluses “significantly exceeded” the government’s 1 percent target in 2005 and 2006 and are expected to continue to come in at 2 percent or even higher in 2007-2010 in spite of the implementation of further tax reductions.

However, spending restraint will be crucial to achieving the government’s near to medium-term fiscal goals, Moody’s said.

“Policy discipline along with lower personal and corporate tax rates has encouraged a flourishing private sector, although the public sector remains one of the largest in the world,” said Moody’s Vice President Kristin Lindow in an annual report on Sweden.

The European Commission has judged Sweden’s government finances to be sustainable over the long-term even as the full impact of population ageing takes effect, Moody’s said.

The ratings agency has a ‘Aaa’ government bond rating and country ceilings on Sweden.