Sweden has ‘large hole’ in finances

Sweden's new Social Democrat-led government has lowered the country's growth forecast, blaming sweeping tax breaks by the outgoing conservative coalition for a "large hole" in finances.

Sweden has 'large hole' in finances
Sweden's economy is growing slowly. Photo: Shutterstock

Finance Minister Magdalena Andersson released a statement on Monday saying:

"These last years of unfinanced tax cuts have contributed to a bigger deficit in public finances, even when the economy has improved." 

Andersson revised the growth forecast for 2014 by 0.4 percentage points to 2.1 percent. 

She also scaled down the growth forecast for 2015 to 3 percent and to 3.2 percent for 2016.

The centre-right government — which lost power to a left-green coalition last month — pledged to return the budget to a surplus by 2017 but the incoming finance minister told Swedish newspaper Dagens Nyheter it would be "unrealistic" until after 2018.

Sweden's Finance Minister 
Magdalena Andersson (right), with new Prime Minister Stefan Löfven

Magdalena who? Find out more about the Finance Minister and the rest of Stefan Löfven's top team

The new government has maintained its predecessor's objective of a one percent budget surplus which has not been achieved since 2008.

"It's time for a responsible policy. Rules are made to be respected," Andersson said, adding that the country's public finances were in a "troublesome" state.

Annika Winsth, chief economist at Nordea bank, disagreed.

"They give the impression that Sweden is very poorly equipped and when you consider the recession we've been through, it's the contrary — Sweden did very well," she told news agency TT.

The budget will be presented to parliament by October 24th at the latest.

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