(Bloomberg) -- Sweden’s Social Democrat-led government is sticking to a surplus regime even as the labor market is showing signs of a rapid deterioration and economic growth has stalled.
At the 2020 budget unveiling on Wednesday in Stockholm, Finance Minister Magdalena Andersson affirmed a budget outlook that counts on surpluses over the next three years. The budget included net initiatives and tax cuts of 24 billion kronor ($2.5 billion) next year.
“The Swedish economy is well equipped to address the uncertainties at home and abroad,” Andersson said in a statement. “Our public finances show a surplus, the central government debt-to-GDP ratio is the lowest since the late 1970s and unemployment has fallen.”
Economists were expecting the budget to be slightly expansionary, but far from stimulative enough to support the Swedish economy, which has stalled under the weight of a global trade dispute. On Tuesday, data showed unemployment in August climbed to the highest in four years, casting doubts over the government’s forecasts.
As previously announced, the budget included an abolition of the top tax rate, cuts in income tax for pensioners and for people in sparsely populated areas. The spending side included additional outlays on justice, defense, education, green initiatives and health care. It also contained a small package with measures to stimulate employment following a rapid deterioration in the jobs market.
The main forecasts were unchanged from what was revealed in late August.
The about 13 billion kronor in tax cuts are mostly concessions to the government’s budget allies, the Center Party and the Liberals, agreed in the so-called January Agreement, which enabled the Prime Minister Stefan Lofven to form a government after the inconclusive 2018 elections.
With key interest rates below zero, calls have mounted for the government to boost borrowing and spending to make investments and support municipalities, struggling under mounting costs of growing welfare needs.
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As the government had promised, an additional 5 billion kronor were earmarked for municipalities. The Swedish Association of Local Authorities and Regions had asked for at the least the double amount to cover the increased costs and on what has been described as a crisis situation.
To contact the reporters on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net;Niclas Rolander in Stockholm at nrolander@bloomberg.net
To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net
©2019 Bloomberg L.P.
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