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Government slashes growth forecasts

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11:50 CEST+02:00
Sweden's centre-right government on Friday slashed its 2008 and 2009 growth forecasts but said the country was still well-positioned to ride out the global economic slowdown.

"GDP (gross domestic product) will now rise by 1.5 percent this year, 1.3 percent in 2009, 3.1 percent in 2010, and 3.5 percent in 2011," the finance ministry said in a statement as the four-party coalition held 2009 budget negotiations.

The government has repeatedly lowered its growth forecasts for this year and next as a result of the global economic slump, which has hit Sweden's export-based economy.

In April, it said it expected growth of 2.1 percent in 2008 and 1.8 percent next year.

The economy came to a full halt in the second quarter, when it registered zero growth, Statistics Sweden announced earlier this month.

In 2007, Sweden posted growth of 2.6 percent.

"The dark clouds that have hung over the global economy have become denser during the summer as a result of growing concerns on the international financial markets," Finance Minister Anders Borg said.

"Increased uncertainty ... has driven up (interest) rates at the same time as stock prices have fallen sharply and negatively affected households and companies around the world," he said.

"At the same time, inflation has increased because of a sharp rise in prices for food and energy, among other things. Sweden is naturally affected by all of this."

The government, which is due to present its 2009 budget to parliament on September 22, said nonetheless that the economy remained fundamentally sound.

"We are pleased to note that public finances have continued to improve,"

Borg said, adding that the government's goal of a one percent surplus had been exceeded, leaving a "broad margin for reform in the coming years."

He said the government planned to announce three reform packages in the budget, as well as tax cuts for households and companies.

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