Sweden Taps Wider Surpluses to Boost Spending on Police, Defense

  • Sees surplus in 2017 versus earlier deficit prediction
  • Government says employment now at highest level since 1992

Sweden’s government is tapping widening surpluses to raise spending on police, health care and education in the wake of the Stockholm terror attack as Prime Minister Stefan Lofven seeks to build support ahead of next year’s election.

The government now sees a surplus of 0.3 percent of gross domestic product this year, rather than the 0.2 percent deficit it forecast in December, according a supplemental 2017 budget released on Tuesday by the Social Democrat-led minority coalition. The surplus is set to increase to 0.6 percent in 2018 and 1.4 percent in 2019 as the government raises taxes.

After years of deficits, the government has brought finances back into a surplus for each year since it took power in late 2014, Finance Minister Magdalena Andersson said on Tuesday in Stockholm. “This has placed us in an entirely new position and offers us new opportunities to meet social challenges,” she said. “The Swedish model can continue to deliver.”

The upbeat forecasts come as Sweden could face political turmoil as the center-right opposition has threatened to block more tax increases planned for next year, arguing they are harmful to the economy. The opposition will need the backing of the Sweden Democrats, a nationalist party that’s emerging as a power broker and threatening to upend the traditional left-right bloc alignment in parliament.

The largest Nordic economy has boomed, in part as the government has raised spending to cope with a record inflow of refugees. While those costs have been high, the impact on finances has been less dire than expected and deficits have turned into surpluses. Andersson said on Tuesday that revenue has risen amid a surge in employment, which in the 20 to 64-year age group has reached a level not seen since 1992.

Sweden, which holds parliamentary elections in September 2018, saw its economy grow 3.3 percent last year after expanding more than 4 percent in 2015. According to the budget bill, growth is now forecast to slow to 2.6 percent this year and 2.1 percent in 2018. Unemployment is predicted to hit 6.6 percent this year and fall to 6.4 percent in 2018.

The government proposed 3.1 billion kronor ($344 million) in new measures in the supplemental budget, including 700 million kronor for the police and 500 million kronor for defense.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE