Sweden braces for 'economic winter' as government unveils cautious budget

Emma Löfgren
Emma Löfgren - [email protected]
Sweden braces for 'economic winter' as government unveils cautious budget
Swedish Finance Minister Elisabeth Svantesson. Photo: Jonas Ekströmer/TT

Sweden is heading for a tough autumn with falling GDP and the inflation target a long way off, Finance Minister Elisabeth Svantesson indicated as she presented a ‘restrained’ budget bill.


“Sweden is still in an economic winter and in a difficult security situation. The government prioritises fighting inflation and supporting households and welfare,” said Svantesson in a press release as she kept the government’s budget reforms down to 39 billion kronor (roughly $3.5 billion).

She said she expects Sweden's economic downturn to last throughout 2024, with the inflation rate according to the consumer price index with interest rates removed (CPIF) forecast to fall from 6 percent this year to 2.7 percent next year, hitting the 2 percent target only in 2025.

The broader CPI inflation rate is expected to fall from 8.7 percent this year, to 4 percent next year and 1.7 percent in 2025, according to the government’s estimates, and Sweden's total public finances are expected to show a deficit for the next three years, 2023-2025. 


Sweden's gross national product (GDP) is expected to land at -0.8 this year, but climb back to 1 percent in 2024 and 2.9 percent in 2025.

The government also predicts that unemployment will rise from 7.6 percent this year to 8.2 percent next year, but that the weak krona will rebound from an average of 11.50 kronor for one euro this year to 11.40 kronor next year and 11.10 kronor the year thereafter.


Svantesson described the budget bill as deliberately "restrained" in order to bring inflation down. She said the reforms of 39 billion kronor would be taken from money already earmarked for reforms, so they won't have to be paid for through direct tax hikes.

The budget includes a previously announced proposal to earmark 16 billion kronor next year for welfare measures, which was welcomed by Sweden’s umbrella organisation for local and regional authorities, SKR. However, SKR also said that it won't be enough, and, reported the TT newswire, that municipalities and regions will end up with a total deficit of 28 billion kronor in 2024 if nothing is done to prevent it.

The biggest single investment is 11 billion kronor for a working tax credit: essentially, a tax cut which benefits all workers, but primarily those earning around 38,000 kronor or less. This will be funded in part by a previous decision to pause the automatic raising of the threshold for when taxpayers in Sweden have to pay state tax, which would otherwise effectively have been a tax cut for high earners.


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