Somewhat larger borrowing requirement

13 June 2012 - Press release

Lower tax income leads to somewhat weaker government finances compared with our previous forecast. Our assessment is that Central government payments will result in a deficit of SEK 32 billion 2012. We expect the economy to recover during 2013 which will mean that the borrowing requirement will decrease.

Despite the on-going crisis in Europe, Swedish public finances are showing resilience. The growth in the Swedish economy will be 1 per cent for 2012 and will next year increase to 2.3 per cent. The weak economy will primarily impact government finances through reduced tax income.

Compared to our assessment in March, tax income has been revised downwards by SEK 17 billion for 2012 and by SEK 21 billion for 2013. The major changes for both years concern corporate taxes and refunds of excess taxes. The reduction is only partially due to the economic downturn. It may relate to accruals and payment shifts in tax payments which are primarily of a one-off character.

Interest payments increase by SEK 7 billion this year since we are bringing forward some of the interest payments by switching existing government bonds to a new bond with a lower coupon.

This means that the deficit for this year increases to SEK 32 billion, which is still below 1 per cent of GDP (1). This may be compared with our previous forecast from March, when the budget deficit was estimated at SEK 11 billion. For 2013, we are expecting a deficit of SEK 15 billion.

We will continue to focus our funding to government bonds. We are now revising our assessment of the borrowing requirement upwards and government bonds will cover half of the increased funding.

The borrowing in government bonds will increase by SEK 9 billion to SEK 59 billion. The increase next year will be of a similar size. The adjustment is done by increasing the issue volume to SEK 3.5 billion per auction. We are, at the same time, reducing the number of auctions.

In October, we will issue a new ten-year government bond which matures in November 2023.

Just as before, we are focusing our borrowing particularly to government bonds in the ten-year segment. There may be occasional issues in other maturities.

The borrowing in inflation-linked bonds remains at SEK 6 billion. The funding in T-bills is also unchanged since the previous forecast. Borrowing in foreign currency bonds of SEK 51 billion refinances the on-lending to the Riksbank.

For more information, please contact:

Håkan Carlsson, budget forecast, +46 8 613 47 33

Thomas Olofsson, borrowing, +46 8 613 47 82

Central Government Borrowing, Forecast and Analysis 2012:2Central Government Borrowing, Forecast and Analysis 2012:2, pdf, (öppnas i nytt fönster)

(1) The cash deficit will be 0.9 per cent of GDP and the otherwise prevalent measure of central government net lending will show a deficit of 0.4 per cent of GDP for 2012.