How Sweden's new spring budget will affect your finances
Curious about how Sweden's latest spring budget will impact your wallet? From cutting down the bureaucracy to plans to reduce taxes on labour, we've got you covered on everything you need to know about its financial implications.
It's that time of year again. The Swedish government is presenting its spring amendment budget (vårändringsbudgeten), usually used to tweak Sweden's main annual budget.
The proposed 2023 spring budget allocations total 4 billion kronor for various measures. According to the initial reactions from several financial analysts, the spring budget is relatively restrained compared to the pandemic budgets in recent years.
The top priority is to fight inflation, which needs to be put under control. That means that public expenditure needs to be limited.
So, what does all this mean for consumers in Sweden, and how could the proposed measures affect your personal finances?
No additional funding for municipalities and regions - for now
Swedish municipalities and regions, fearing a 24 billion kronor deficit next year, have requested information about future financing. However, the government has postponed decisions on potential state grants until autumn.
"If we do it (note: provide extra funding to municipalities and regions) in this situation, there are risks that inflation will be even higher," Finance Minister Elisabeth Svantesson (M) said on Monday.
She also emphasized that the municipalities and regions have already received 12 billion kronor this year.
However, the fact that there is no extra money on the way for municipalities and regions in the short term means likely cuts to schools, healthcare, and elderly care.
"The question is whether we can really maintain the quality in both healthcare and social care. The risk is that there will be long-term damage if we get poorer quality," Mattias Persson, chief economist at Swedbank, told the news agency TT.
The spring budget also points to cuts in state administration, likely reducing the number of authorities, but the government has yet to specify which ones.
Housing allowance supplement, employer sick pay costs, and Swedish lessons for Ukrainians
The Kristersson administration has already announced that the increased supplement to the housing allowance for families with children will be extended, which is expected to cost 720 million kronor.
"It is one of the most targeted things one can do for those who are most financially vulnerable," Svantesson explained.
However, the most significant expenditure increase – 800 million kronor – is set aside for increased sickness pay costs for employers.
Approximately the same amount, 719 million kronor, is allocated to increase the number of vocational education study places.
The government has also set aside 100 million kronor for Swedish lessons (SFI) for Ukrainians.
Sweden's SFI system provides free language lessons for immigrants to the country but has so far not been offered to Ukrainians who came to Sweden in 2022 under the EU's Temporary Protection Directive, as they were not expected to remain in the country for the long term. The program is intended to assist Ukrainians in acquiring knowledge about Swedish culture, enabling them to secure employment swiftly and actively contribute to society.
Reduced taxes on labour postponed
Financial Minister Svantesson acknowledged that it is challenging to balance supporting households and businesses at a time when investments risk fueling inflation.
It also makes it difficult to implement its promise of reduced taxes on labour. But the government stated that it would propose further reduced taxes on income when the economic situation allows for such interventions.
Still, no concrete proposals are being announced now, making it difficult to count on tax cuts anytime soon.
Defence, security, and other allocations
The military can count on 660 million kronor for, among other things, NATO-related investments.
The Swedish Prison and Probation Service will be strengthened with 300 million kroner, while 50 million kronor has been earmarked for Säpo, the Swedish Security Service.
The Swedish Public Employment Service (Arbetsförmedlingen) can expect 50 million kronor, and the government is also setting aside the same amount for new family homes for at-risk children.
The spring budget envisages increased support for young people with neuropsychiatric disabilities (27.5 million kronor) and additional funding for the Swedish Competition Authority (12 million kronor).
Inflation to stick around, unemployment and interest rates to rise
The Swedish government also used the spring budget proposal to lower its forecast for the country's economic growth this year. On top of that, it expects a recession until 2026.
Sweden's GDP is estimated to fall by 1.0 percent this year, and the government predicts that inflation will amount to an average of 8.8 percent in 2023.
Next year, it will likely fall to 3.6 percent, according to the spring budget.
"The high inflation leads to real wages falling and the value of savings decreasing. High indebtedness and a high proportion of housing loans with variable interest rates make Swedish households and companies particularly sensitive to the rapidly rising interest rates that result from inflation," the government warned in a press release.
Unemployment is expected to rise from 7.5 percent last year to 7.9 percent this year and then rise up to 8.3 percent.
"We are in a very difficult economic situation. Many are struggling to make ends meet, so it is important for the government to fight inflation and support those having the hardest time", Finance Minister Svantesson noted.
In its new forecast, the Ministry of Finance also estimates that the key interest rate will be raised to an average of 3.29 percent this year and continue to increase to an average of 3.43 percent next year. This, in turn, will also likely result in an increase in mortgage interest rates.
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It's that time of year again. The Swedish government is presenting its spring amendment budget (vårändringsbudgeten), usually used to tweak Sweden's main annual budget.
The proposed 2023 spring budget allocations total 4 billion kronor for various measures. According to the initial reactions from several financial analysts, the spring budget is relatively restrained compared to the pandemic budgets in recent years.
The top priority is to fight inflation, which needs to be put under control. That means that public expenditure needs to be limited.
So, what does all this mean for consumers in Sweden, and how could the proposed measures affect your personal finances?
No additional funding for municipalities and regions - for now
Swedish municipalities and regions, fearing a 24 billion kronor deficit next year, have requested information about future financing. However, the government has postponed decisions on potential state grants until autumn.
"If we do it (note: provide extra funding to municipalities and regions) in this situation, there are risks that inflation will be even higher," Finance Minister Elisabeth Svantesson (M) said on Monday.
She also emphasized that the municipalities and regions have already received 12 billion kronor this year.
However, the fact that there is no extra money on the way for municipalities and regions in the short term means likely cuts to schools, healthcare, and elderly care.
"The question is whether we can really maintain the quality in both healthcare and social care. The risk is that there will be long-term damage if we get poorer quality," Mattias Persson, chief economist at Swedbank, told the news agency TT.
The spring budget also points to cuts in state administration, likely reducing the number of authorities, but the government has yet to specify which ones.
Housing allowance supplement, employer sick pay costs, and Swedish lessons for Ukrainians
The Kristersson administration has already announced that the increased supplement to the housing allowance for families with children will be extended, which is expected to cost 720 million kronor.
"It is one of the most targeted things one can do for those who are most financially vulnerable," Svantesson explained.
However, the most significant expenditure increase – 800 million kronor – is set aside for increased sickness pay costs for employers.
Approximately the same amount, 719 million kronor, is allocated to increase the number of vocational education study places.
The government has also set aside 100 million kronor for Swedish lessons (SFI) for Ukrainians.
Sweden's SFI system provides free language lessons for immigrants to the country but has so far not been offered to Ukrainians who came to Sweden in 2022 under the EU's Temporary Protection Directive, as they were not expected to remain in the country for the long term. The program is intended to assist Ukrainians in acquiring knowledge about Swedish culture, enabling them to secure employment swiftly and actively contribute to society.
Reduced taxes on labour postponed
Financial Minister Svantesson acknowledged that it is challenging to balance supporting households and businesses at a time when investments risk fueling inflation.
It also makes it difficult to implement its promise of reduced taxes on labour. But the government stated that it would propose further reduced taxes on income when the economic situation allows for such interventions.
Still, no concrete proposals are being announced now, making it difficult to count on tax cuts anytime soon.
Defence, security, and other allocations
The military can count on 660 million kronor for, among other things, NATO-related investments.
The Swedish Prison and Probation Service will be strengthened with 300 million kroner, while 50 million kronor has been earmarked for Säpo, the Swedish Security Service.
The Swedish Public Employment Service (Arbetsförmedlingen) can expect 50 million kronor, and the government is also setting aside the same amount for new family homes for at-risk children.
The spring budget envisages increased support for young people with neuropsychiatric disabilities (27.5 million kronor) and additional funding for the Swedish Competition Authority (12 million kronor).
Inflation to stick around, unemployment and interest rates to rise
The Swedish government also used the spring budget proposal to lower its forecast for the country's economic growth this year. On top of that, it expects a recession until 2026.
Sweden's GDP is estimated to fall by 1.0 percent this year, and the government predicts that inflation will amount to an average of 8.8 percent in 2023.
Next year, it will likely fall to 3.6 percent, according to the spring budget.
"The high inflation leads to real wages falling and the value of savings decreasing. High indebtedness and a high proportion of housing loans with variable interest rates make Swedish households and companies particularly sensitive to the rapidly rising interest rates that result from inflation," the government warned in a press release.
Unemployment is expected to rise from 7.5 percent last year to 7.9 percent this year and then rise up to 8.3 percent.
"We are in a very difficult economic situation. Many are struggling to make ends meet, so it is important for the government to fight inflation and support those having the hardest time", Finance Minister Svantesson noted.
In its new forecast, the Ministry of Finance also estimates that the key interest rate will be raised to an average of 3.29 percent this year and continue to increase to an average of 3.43 percent next year. This, in turn, will also likely result in an increase in mortgage interest rates.
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