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FINANCIAL CRISIS

Borg: growth forecast under revision

Sweden's finance minister Anders Borg on Thursday warned that the government will need to revise down its strong economic growth expectations for 2012 due to the global financial market turbulence.

Borg: growth forecast under revision

“It is obvious that we will carry out a significant downward revision of the forecast we provided in the spring” for next year due to the “current turbulence”, Borg said at a press conference.

On April 13th, Borg had said that Sweden’s gross domestic product was expected to grow 4.6 percent this year and by 3.8 percent in 2012.

On Thursday, the finance minister said Sweden’s centre-right government did “not yet have all the elements at hand” to estimate the exact impact the current crisis would have on the country’s GDP trajectory.

The turmoil on global stock markets amid growing concerns of a new looming financial crisis would also have “consequences for public finances” in Sweden, one of Europe’s strongest economies, Borg said.

He added that his previous forecast of a nearly 2 percent budget surplus in 2012 would likely be revised down as well.

He stressed however that Sweden remained “well-prepared” to face the global turbulence, pointing out that the country “has long experience in handling

this kind of problem”.

“It is becoming increasingly probable that we will be close to balancing (the budget) or even a surplus this year and that we have good possibilities of securing strong public finances,” Borg said.

“We will have the strongest public finances in the EU system, or one of the strongest, next year as well, just not quite as strong as we previously thought,” he added.

And according to prime minister Fredik Reinfeldt the latest financial crisis does not mean raised taxes or cuts.

“As it stands right now, we are within safety margins and we can tell the Swedish people that in Sweden, unlike in other countries, there are no raised taxes and no cuts to the budget around the corner,” Reinfeldt said at the press conference.

The government is set to present its 2012 budget next month.

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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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