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FINANCIAL CRISIS

Borg sees the light for State’s finances

The State’s finances will recover faster than what was earlier estimated, following Sweden’s faster-than-expected recovery from the financial crisis, the government has announced. The State’s budget should now be balanced or in surplus by 2013/2014.

Borg sees the light for State’s finances

In presenting the government’s new prognosis on Friday, Finance Minister, Anders Borg said that the new estimate for the budget position next year is a deficit of 89 billion kronor ($13 billion), compared with a deficit of 107 billion in earlier budget estimates.

In 2011, the State finances will be in better shape to the tune of 10 billion kronor, compared with earlier estimates, with a deficit of 57 billion kronor. In 2012 the deficit is expected to be 18 billion kronor.

Consequently, Borg says that the government will make savings in reduced spending on workplace measures, while estimated income tax revenue will be higher than the government’s earlier estimates.

According to Borg, a very expansive economic policy for Sweden is appropriate. “It will remain expansive throughout 2010,” Borg said at a press conference. To a certain degree, the expansive economic policy ought to continue throughout 2011, while after that the policy settings will soften, according to Borg.

Borg stated that other European countries would need to handle their economies properly when the worst of the crisis is passed, with increased taxes and fiscal tightening, but Sweden will be able to avoid such pain, he says. “We are not in that situation,” Borg said.

Borg is already preparing for the next downturn, and he therefore believes that the State’s finances must be in surplus as quickly as possible when the current crisis dissipates. “We must be in proper shape before the next downturn,” he said. Borg estimates a surplus in the State’s finances by 2013 and 2014, of 0.4 percent and 1.1 percent, respectively.

With this upwardly revised estimate of the State’s finances, the national debt will peak next year, when it will be 38.4 percent of GDP, compared with 37.2 percent this year. In 2011 national debt will plateau, and will then fall to 37.6 percent in 2012, according to Borg’s prognosis.

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BUDGET

‘Weak, slow and difficult’ economy ahead: Borg

Swedes are in for a rough economic ride in years ahead, as Finance Minister Anders Borg has warned of rising unemployment, weaker economic growth and rising public debt in the spring fiscal policy bill released on Monday.

'Weak, slow and difficult' economy ahead: Borg

“There is a strong headwind from the global economy, which is holding back the recovery in Sweden,” Borg said in a statement.

According to the latest government forecasts, the Swedish economy is expected to grow at 1.2 percent in 2013 before creeping up to 2.2 percent next year and 3.6 percent in 2015.

Unemployment, meanwhile, is expected to reach 8.3 percent in 2013, rising to 8.4 percent next year before dropping to 8.1 percent in 2015.

“We have weak, slow, and difficult years ahead of us,” Borg told the Aftonbladet newspaper.

The new figures mark a significant downgrade from the government’s last economic prognosis released in December, which forecast 2014 growth of 3.0 percent, while the jobless rate was expected to peak at 8.3 percent next year before falling to 7.4 percent in 2015.

Borg said that Sweden is in the middle of a nine-year period of sluggish economic growth that began back in 2008.

“Our strong position and the confidence in Sweden’s public finances are making it possible to proceed with more measures to mitigate the impact of the international crisis on the labour market and support a gradual recovery,” said Borg.

Sweden plans to spend 3 billion kronor ($470 million) in 2013 and 2014 to combat unemployment, adding that the final budget bill to be presented in the autumn may contain “some room” for additional spending.

“The government’s goal is to strengthen the public finances as the economy recovers so as to achieve the surplus target. We will not deviate from this objective,” said Borg.

According to Monday’s figures, the government expects Sweden’s public debt to reach 1.6 percent of GDP in 2013 before falling to 1.0 percent next year. The government expects Sweden’s budget to reach balance in 2015.

Household consumption is seen as a key driver for the Swedish economy, with the government warning that a higher than estimated savings rate could negatively affect the country’s economic recovery.

“If household behaviour proves to be different and savings remain at a high level, Sweden’s economic recovery could be more drawn out than what’s expected in the forecast, with higher unemployment as a result,” the government said in a statement.

Erica Blomgren, analyst at bank SEB, said the government’s previous growth forecast from the autumn was “too optimistic”, while the current forecast was “more in line” with that of the central bank.

Sweden will hold legislative elections in September 2014, when the left-wing opposition, headed by Social Democrat leader Stefan Löfven, hopes to wrestle power from the centre-right government in power since 2006.

In a speech Friday, Löfven promised that if the Social Democrats were to win the elections, they would bring the unemployment rate down to 4.7 percent by 2020.

“The government has failed on the jobs front, and Sweden today has higher unemployment than comparable countries in the European Union,” Löfven lamented, citing eurozone countries such as Austria, Belgium, Finland and the Netherlands.

Until September last year, Prime Minister Fredrik Reinfeldt’s government had aimed to have a budget surplus in 2013.

According to Monday’s forecasts, public debt is expected to climb to 42 percent of gross domestic product this year, compared to 38.2 percent in 2012.

TT/AFP/The Local/dl

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