Sweden close to budget balance

16 June 2010 - Press release

Swedish central government finances are approaching balance already this year, as the economy recovers more quickly than expected. Increased tax revenue and lower expenditure for unemployment contribute to a reduction in the budget deficit in 2010 and a further decrease next year. The smaller deficits lead to a reduction in central government borrowing.

The Debt Office's new forecast indicates a budget deficit of SEK 14 billion in 2010 and SEK 8 billion in 2011. This is a reduction of SEK 39 billion and SEK 28 billion compared with the previous forecast. Excluding on-lending, the budget is practically balanced.

The reduced deficit in 2010 compared with the previous forecast is mainly explained by increased tax revenue. At the same time, unemployment benefit disbursements will be lower. The reduction of the deficit in 2011 is mainly due to an increase in tax revenue apace with the economic recovery.

There are clear indications that the economic recovery has strengthened. Many businesses have reported rising demand while unemployment has increased less than expected. However, the macroeconomic assessment is more uncertain than usual, since it is difficult to assess the further development of the debt crisis in Europe.

Reduced borrowing in all types of debt

The unexpectedly strong development of central government finances has led to a decrease in the borrowing requirement. The Debt Office is therefore reducing borrowing in all types of debt compared with the March forecast. Central government borrowing, including refunding of maturing loans, is expected to total SEK 105 billion in 2010 and SEK 100 billion in 2011.

The issue volume in nominal government bonds will be reduced from SEK 3 billion to SEK 2.5 billion per auction from 18 August. The stock of T-bills will shrink from an estimated SEK 120 billion to an average of SEK 105 billion this year and SEK 85 billion next year. Borrowing in foreign currency bonds will also be somewhat smaller.

Borrowing in inflation-linked bonds will remain at SEK 9 billion in 2010 but decrease to SEK 6 billion in 2011. The Debt Office will introduce a new inflation-linked loan this autumn maturing in 2017.

Central government debt remains below 40 per cent

The central government debt will be SEK 1,190 billion at the end of 2010 and SEK 1,178 billion at the end of 2011, corresponding to 37 and 36 per cent of GDP.

Central government debt including the Debt Office's financial assets in foreign currency is estimated at SEK 1,085 billion at the end of 2010 and SEK 1,073 billion at the end of 2011. This corresponds to 34 and 32 per cent of GDP.

Further information can be obtained from:

Sofia Olsson, budget forecast, +46 8 613 47 30
Magdalena Belin, funding, +46 8 613 52 28