Large surpluses in central government finances in 2011 and 2012

18 May 2011 - Press release

Central government finances improve and our new forecast shows a budget surplus of SEK 99 billion in 2011 and a surplus of SEK 68 billion in 2012. The surplus is partly due to the fact that the sale of state-owned assets is expected to generate income of SEK 38 billion in 2011 and SEK 25 billion in 2012. A strong economic recovery will have an impact on central government finances this year and next year, mainly through increasing tax income. Borrowing decreases compared with the previous forecast.

The Swedish National Debt Office expects the surplus to increase by SEK 81 billion in 2011 compared with the previous forecast. A large part of the increase, SEK 38 billion, is attributable to income from sale of the shareholdings in above all Nordea but also in Teliasonera. The rest is due to the economic recovery which leads to increasing tax income. At the same time, there is a modest increase in central government expenditure.

The budget surplus in 2012 is expected to be SEK 10 billion lower than the previous forecast. We assume that part of the state-owned assets will be sold already in 2011 and thus the income from sale of state-owned assets will be SEK 10 billion lower in 2012 than estimated in November. Furthermore, we assume fiscal easing totalling SEK 30 billion during 2012, of which SEK 22 billion have previously been announced by the government. The effects of the changed assumptions regarding sale of state-owned assets and the fiscal easing are counteracted by the fact that we at the same time estimate higher tax income next year.

Central government debt below 30 per cent of GDP in 2012

Central government debt is estimated at SEK 1,048 billion at the end of 2011 and SEK 981 billion at the end of 2012. This corresponds to 30 and 27 per cent of GDP.

We estimate the central government debt including the Debt Office’s financial assets (short-term investments and on-lending) at SEK 964 billion at the end of 2011 and SEK 898 billion at the end of 2012. This corresponds to 28 and 25 per cent of GDP.

Decreased borrowing

Larger central government budget surpluses leads to decreased borrowing in both 2011 and 2012 compared with our previous forecast.

Even though we give priority to funding in nominal government bonds, the issue volume is reduced by SEK 8 billon and SEK 16 billion respectively in 2011 and 2012. Government bond borrowing will be focused on the 10-year benchmark. The T-bill stock is reduced slightly and borrowing in inflation-linked bonds also continues to be limited.

In order to promote liquidity in the government bond market we expect to offer exchanges to loan 1054 on 30 and 31 May. The offer requires that costs are very limited for the Debt Office. We expect a rather strong demand and assess that exchange volumes will be in the order of SEK 10 billion. We will provide more detailed information on 23 May.

Given the limited funding volume in government bonds, it is necessary to review what can be done in the long term to assure the liquidity of the market. We will analyse and discuss possible effects of a declining debt when we submit proposed guidelines to the government at the end of September. We will also analyse the interest in further exchanges.

Further information can be obtained from:

Sofia Olsson, budget forecast, phone +46 8 613 47 30

Thomas Olofsson, funding, phone +46 8 613 47 82

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Central Government Borrowing, Forecast and Analysis 2011:1Central Government Borrowing, Forecast and Analysis 2011:1 pdf, (opens in new window)