Public bailouts cause Sweden’s deficit to swell

Sweden’s National Debt Office (Riksgälden) said on Wednesday it expects the country’s budget deficit to balloon to 135 billion kronor ($14.7 billion) in 2009, just one year after posting a 135 billion kronor surplus.

That number is almost six times the previous forecast from November, owing to various state aid packages to combat the current economic slowdown.

For 2010, the budget deficit is expected to shrink back to 65 billion kronor, the debt office said.

In November, it had forecast deficits of 23 billion in 2009 and 35 billion in 2010, after several years of healthy budget surpluses.

“The deterioration in central government finances is mainly due to the lending and other support measures such as the capital contribution programme for banks, lower tax income and the fact that there will be no income from sales of state assets,” the debt office said.

It added that it expected the Swedish economy to contract by 2.0 percent in 2009 before bouncing back to see growth of 2.0 percent in 2010.