Sweden may already start enjoying a budget surplus this year – Finance minister


Wednesday, 13 April 2011
Sweden is facing an economic growth equivalent to that observed in the 1950s and 1960s when Sweden leapt from a third world economy to an advanced industrial economy. The Swedish finance minister Anders Borg today when presenting the spring budget bill to the parliament made this kind of comparison.  But he warned of potential contamination from the outside world.

Already this year according to Borg, there will be a small surplus in the state budget, and in 2012 it could resemble two percent of GDP, or Skr65 billion.
At the end of the forecast period, which is the height of the next election, the government believe that the surplus may be at Skr180 billion.

“More people would have jobs, and those who’ll work would be working longer hours. We will have more in good tax revenue, "said Borg.
This means that there seems to be pretty good scope for government to implement its announced reforms proposed earlier.
Creating more jobs has always been the priority of the alliance government and its most central position. But its credibility in that area has been difficult to maintain in recent years, where despite great economic growth, unemployment has been rising. However, Borg could significantly feel a bit relaxed now as it is found that unemployment seems to be falls faster than any forecasters predicted.

The job tax credits and changes in unemployment insurance seem to have made Borg to set out a forecast that unemployment will hit around five percent in a few years, when an additional 300,000 people entered the labour market.

Using the traditional way of measuring this, it would correspond to approximately 3.3 percent. This will bring unemployment so low that it could compete with how it was in the 1990s. But then, it led to overheating and inflation.

“Anyone who was there at that time, remember that employers were unable to recruit without driving up inflation. But then one has to go back to 1950s - and 1960's to find a similar situation, "he said.

He believed that today there is almost no employers who have experienced what it is to recruit people in such economic environment, and also ensure that people remain in jobs. In a few years it will be a challenge, guessed Borg, after years of low unemployment and low wage costs workers would start negotiating higher wages that and this might start driving up inflation. As such Sweden is facing a very big change of culture in its economy.

But Anders Borg is also sounding a warning bell for the Swedish economy despite the upbeat. Although the Sweden economy is growing well and almost uninterrupted, “we are in a partially grim environment” he said.

Many of Sweden’s trading partners have big problems with deficits. It can be difficult to conduct stabilization policy the next time there will be a recession, believed Borg. Meanwhile, the competitive position of Swedish exports companies will increasingly be fierce.
Last year the government adopted the view that the continued financial turmoil was the main threat to the economic upturn. Now, that has to be toned down. Instead, the risk of overheating emerged, as well as instability in North Africa and rising commodity prices. The balance of risks is "more integrated".

As if to respond to the new Social Democrat leader, Hakan Juholt criticism of growing inequality and increasing child poverty in Sweden, Anders Borg claimed that Sweden is one of the few countries that, despite the years of crisis still have a model that there is "care for security and cohesion".

“The risk that one would have to live in hardship is lower in Sweden, Denmark and Finland than in virtually all other countries”. Most people who suffer a weak position in the labour market, here and there, is about to change "said Finance Minister. While he conceded that it may also require targeted interventions such as residential and large family supplement.

Anders Borg took a swipe at the banks. Sweden is one of the countries that are relatively reliant most in the banking sector, which gives a specific vulnerability in uncertainty, he noted.

“It is clear that a large and expanding international banking operation implies a significant risk to taxpayers. We should not risk Swedish welfare to banks taking risks in other countries” he said.
By Team

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