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Sweden to Support Stabilizing Economy as Risks Remain, Borg Says

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March 1 (Bloomberg) -- Sweden’s government will keep up support of the economy as turmoil in the euro area still risks derailing a recovery, Finance Minister Anders Borg said.

There’s still “a need to support growth,” Borg told reporters today in Stockholm. “It’s still our intention that the budget when it’s presented in the autumn should have a supporting, energizing profile.”

Sweden’s economy stalled in the fourth quarter as exports declined, countering a rise in consumer spending and investments, the country’s statistics agency said today. There are signs the economy may return to growth this quarter after a survey of purchasing managers indicated that the manufacturing industry expanded in February for the first time since July.

“We’re seeing a stabilization of the Swedish economy,” Borg said. The PMI reading “is in line with growth of about 1 percent this year and that’s not a strong recovery and, as long as growth is that slow, we must expect the risk of rising unemployment,” he said.

The government in December forecast the economy will grow 1.1 percent this year and 3 percent in 2014. The $500 billion economy expanded 0.8 percent last year, Statistics Sweden said today.

Political turmoil in Europe could derail the recovery as financial markets are underestimating risks stemming from how Italy will manage its debt-stricken economy, Borg said.

“There’s political uncertainty associated with the election in Italy, the banking system in Spain and the troubles in Cyprus and Greece,” he said. “‘The danger is not yet over for the Swedish economy.”

The euro area shrank 0.6 percent in the fourth quarter after contracting 0.1 percent in the third, according to preliminary data. That’s the worst performance since the first quarter of 2009 in the aftermath of the collapse of Lehman Brothers Holdings Inc. Germany’s economy, Europe’s biggest, also slumped 0.6 percent in the final three months of last year.

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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