Swedish finance minister decries severe impairment to the country’s economic forecast


Saturday, 27 August 2011
Swedish economic growth trajectory has been distorted by the persistent bad economic news coming from Europe and the USA. This past months have seen the stock market swung more than observed at any time before wiping out lots of money from the face of stocks, shares bond and the like.

The Swedish finance minister Anders Borg as a result feels that this has casted very serious doubt on his financial plan for the country in the coming years.
“The forecast we are doing today means a sharp downward revision of growth,” said Finance Minister Anders Borg at a press conference yesterday in connection with the government's budget deliberations at Harpsund, near Stockholm.

All the same, Borg still expects a balanced budget for 2012.  According to the minister, there will be close to zero growth in net lending. The government estimates that GDP growth will be 4.7 percent this year and that it falls to 1.3 percent in 2012, which is a sharp revision from the previous forecast. Earlier the government expected a growth of 4.6 percent in 2011 and 3.8 percent in 2012.

To meet the crisis Anders Borg, think of temporary measures and said: “We need to take more of temporary demand stimulus.”

That means moderation with permanent budget initiatives.
“It's a fairly heavy financial position right now,” he added on the way to Friday's press conference at Harpsund.


The government now expects growth to slow sharply and unemployment to starts rising again. The forecast track according to the finance ministry is that unemployment will rise, from 7.5 percent this year to 7.8 percent in 2012.

The government also predicted that the economy will start to run, but that the recession will be very lengthy.
GDP growth in 2013 is forecasted to stand at 3.5 percent. For 2014 it becomes 3.9 percent and 3.7 percent for 2015.

Borg notes that several large banks in Europe are obviously going to struggle with cash flow problems, and inability to borrow in the financial market. The problems are not as serious as the financial crisis of 2008, after the Lehman bankruptcy.

“But there are very serious risk scenarios attached to such a development.”
Unemployment is expected after the hitting the peak of 7.8 percent in 2012 to gradually fall to 5.5 percent in 2015.

Inflation, measured by consumer price index (CPI), is expected to fall to 1.2 percent next year from this year's projected 3.0 percent. 2013 estimated the CPI should reach 1.8 percent. Earlier the government expected an inflation rate of 2.0 percent in 2012 and 2.8 percent 2013.

Borg also notes that the debt crisis has deepened over the summer and that the U.S. and several countries in the euro area have serious fiscal problems. Therefore, there is also considerable uncertainty about where the economy is going, but the risks of weaker growth dominate, according to Swedish treasury department's assessment.

The state budget is expected in 2012 to be in balance for a budget surplus of 0.1 percent this year. Earlier the government expected a budget surplus in 2012 of 1.8 percent. During the 2013 state budget presentation it was expected that it would produce a surplus of 0.8 percent, against the earlier estimate of 2.8 percent, while the surplus for 2014 is expected to stay at 2.1 percent against the previous estimate of 3.6 percent.
By Team

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