Swedish budget deficit lingers on slower economic recovery

9 December 2014 - Press release

Sweden’s central government budget will show a deficit for at least two more years as the economic rebound takes longer than expected. The Debt Office expects a deficit of SEK 60 billion in 2014, SEK 51 billion in 2015 and SEK 13 billion in 2016.

The budget deficit – the net borrowing requirement – for 2014 is in line with the Debt Office’s previous forecast. Next year’s deficit, however, is SEK 40 billion higher than predicted in June. Slower economic growth will curb tax income, at the same time as some expenditures rise. 

The Debt Office now expects the Swedish economy to grow by 1.9 per cent this year and 2.2 per cent in 2015. This is a reduction of 0.8 percentage points for each year compared with the previous forecast. In 2016, growth will pick up to 2.7 per cent.

– The weaker development of international demand, especially in the euro zone, means that Swedish exports will grow at a slower pace than previously expected and that the recovery will be delayed, says Hans Lindblad, Director General of the Debt Office.

Against the background of the uncertainty prevailing before the budget vote in the Riksdag, the Debt Office chose to make a technical assumption for its calculations to the effect that this forecast is based on unchanged rules for income and expenditure. The forecast changes are therefore wholly due to macroeconomic factors and volume changes.

Net borrowing requirement and debt (SEK billion)
                     201420152016

Net borrowing requirement (budget deficit)

60

51

13

Central government debt

1,380

1,419

1,431

Central government debt as a percentage of GDP

35 %

35 %

34 %

Central government debt including on-lending and money-market assets as a percentage of GDP

29 %

29 %

28 %

Two new inflation-linked bonds and increased foreign-currency borrowing

The increased borrowing requirement in 2015 will be funded by foreign-currency bonds and money-market borrowing. The issue volume in government bonds will remain at SEK 3.5 billion per auction.

Borrowing in T-bills will be lower at the end of 2015 than previously planned. Instead, borrowing in commercial paper will increase.

The issue volume in inflation-linked bonds is unchanged from the June forecast. The Debt Office will introduce two new inflation-linked bonds during the first half of 2015: one with a four-year maturity and one with a 17-year maturity.
 

Borrowing (SEK billion)
                     201420152016

Government bonds

77

77

77

Inflation-linked bonds

17

18

18

T-bills

100

110

120

Commercial paper

95

100

40

Foreign-currency bonds

84

97

77

–      of which on-lending to the Riksbank

59

57

55

Central government borrowing – forecast and analysis 2014:3, pdf

Contact:
Thomas Olofsson, Head of Debt Management, +46 8 613 47 82
Linda Wik, Public Relations Officer, +46 8 613 46 18