Sweden Cuts Economic Forecasts as Weak Exports Hamper Recovery

Sweden’s government cut its growth forecast for this year and next, predicting a slower rebound in exports as it plans a reduction in income taxes to stimulate growth ahead of September elections.

The $540 billion economy will expand 2.4 percent in 2014 compared with a Sept. 18 forecast of 2.5 percent, the government said in a statement today. Growth will be 1 percent this year versus an earlier 1.2 percent estimate.

“The growth rate will strengthen and unemployment will decline slightly in 2014,” the ministry said. “At the same time, there is still uncertainty about the economic outlook. The risk of weaker growth continues to dominate.”

The government has pledged a fifth round of income tax cuts since 2006 in an effort to boost consumer spending. The plan isn’t winning over voters and Prime Minister Fredrik Reinfeldt’s four-party coalition is trailing in polls ahead of general elections due in nine months.

The central bank this week cut its main lending rate to 0.75 percent from 1 percent to boost demand after consumer prices unexpectedly fell last month.

Inflation will be 0.4 percent next year compared with an earlier forecast of 0.9 percent, the government predicted.

Exports will rise 1.9 percent in 2014, less than an earlier prediction for 3 percent export growth. Sales abroad will slide 1.5 percent this year. After reaching 8 percent this year, unemployment will fall to 7.7 percent next year, the government said.

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