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Sweden reports Budget surpluses despite economic slowdown and long and short term uncertainties. 

Tuesday, 25 October 2011
The economic recovery is slowing, but the state budget remains in surplus. The Swedish Debt Office now expects a surplus of Skr69 billion for 2011, Skr25 billion next year and Skr29 billion in 2013, according to a new prognosis.

In May the Swedish debt office forecast a surplus of SEK99 billion in 2011 and SEK68 billion in 2012.
"The Swedish central government budget continues to show a surplus, despite a weakened economic recovery," the Debt Office said in a statement. "The weaker economic development has an effect on central government finances mainly through lower growth in tax revenues next year," the agency said.

The weaker economic growth will increase the borrowing requirement to Skr35 billion in bonds, up from Skr22 billion to a forecast in May.
Public debt is expected to shrink by 31 per cent of GDP this year to 28 percent 2013

"Despite the slowdown, the Swedish central government finances remain solid. It depends on relatively low spending pressures, a prudent fiscal policy and a continued increase in important tax bases as well as consumption and wage growth," writes The Debt Office in its new forecast


The calculations are based, according to the National Debt Office, on that the economic slowdown will be relatively mild and that the handling of the debt crisis in the euro zone is not derailed.

"However, there is a clear risk that the crisis will deepened and that economic development will be significantly worse", warns the Debt Office.

If there is zero growth in 2012, the budget will be reduced next year  by approximately Skr 50 billion, and the additional fiscal measures are not made, according to the National Debt Office.

“Sweden is in an enviable position, although we believe the slowdown will be longer than the government has predicted in its assessment. We expect the surplus in both 2012 and 2013, despite the slowdown, says the debt office CEO, Bo Lundgren.

The Debt Office has also made an assessment that assumes that economic development would be considerably worse, with zero growth in 2012 and rising unemployment. If that horror scenario would come true, it would still not reduce the central government’s position of more than Skr50 billion in 2012. A surplus of Skr25 billion would turn into a deficit of Skr25 billion, which is less than 1 percent of Sweden's GDP.

“This shows the strong robustness of the Swedish economy,” says Lundgren.
He does not believe that Swedish households have to worry about as much for the economic development of households as it should be elsewhere.

Swedish households do not have to fear big tax increases or substantial savings, as households should be more optimistic about their personal finances than they apparently are, according to the assessment.
By Team
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