Swedish economic growth hits 30 year low

Swedish Finance Minister Anders Borg said on Tuesday that the country’s economic growth was its weakest in three decades as he announced that the government now forecasts the economy will contract by 0.8 percent next year.

The government’s previous gross domestic product (GDP) forecast, from November, was for 0.1 percent growth next year, though in a second, gloomier scenario the economy was seen contracting 1.2 percent.

Borg told journalists the government expected growth of 1.5 percent in 2010 and that previous efforts to keep tabs on public spending was now paying dividends.

“Thanks to the fact that we have maintained strong public finances during the good times, we can now address this downturn without being forced to make cuts or raise taxes,” said Borg in a statement.

Borg projected, however, that Sweden’s current 2.5 percent government surplus would soon be transformed into a deficit of 1.0 percent in 2009 and 2010.

He expected Sweden to return to a surplus of 0.7 percent in 2011.

The government also expects Sweden’s labour market to suffer in the next two years, with unemployment climbing to 7.7 percent in 2009 and 8.5 percent in 2010, before improving somewhat in 2011, when the government projects an unemployment rate of 8.3 percent.

Borg added that the government did not plan to carry out any further sales of state assets until equity markets recovered and that the new forecasts did not include any further divestments and that a resumption of the government’s privatisation programme was likely to be postponed “some while”.

“When the stock market recovers and the right conditions exist we will get back to it,” Borg said.

The Swedish centre-right government is midway through the Nordic country’s biggest ever privatisation programme, a drive that has included the sale of assets such as Absolut vodka maker Vin & Sprit.