Sweden Says Brexit, Trade Tensions May Limit Scope for Spending

(Bloomberg) --

Sweden's government said risks stemming from the U.K.'s efforts to leave the European Union and global trade tensions are clouding its economic outlook, as it lowered growth and surplus forecasts for the years ahead.

The center-left coalition ruling Scandinavia's biggest economy said economic indicators show that growth will slow during 2019, making it more difficult to set ambitious budget goals.

"The scope for reforms is non-existent in the coming spring,” in part due to parliament's decision to cut taxes, Finance Minister Magdalena Andersson said at a press conference in Stockholm on Monday. The Social Democrat-led coalition of which Andersson is a part has been under pressure to increase spending and cut taxes further, amid record-low debt levels.

September's general election failed to produce a clear winner, forcing the Social Democrats and their traditional allies, the Greens, to seek new coalition partners. They eventually secured the support of the Center Party and the Liberals, but only after agreeing on a long list of reforms that included tax cuts.

The government is due to present its first budget on April 10. It is expected to contain reforms of as much as 5 billion kronor ($541 million), of which around half will go toward protecting the environment and to cutting some payroll taxes, Center Party chief economist Martin Adahl said.

Sweden's New Coalition Plans Tax Cuts Into 2020 to Stoke Jobs

The Numbers

• The economy is now forecast to grow at 1.6 percent both this year and the next, compared with November forecasts of 2.1 percent and 1.6 percent, respectively
• The budget surplus is expected to be at 0.6 percent of gross domestic product in 2019 and at 0.7 percent in 2020, versus a previous forecast of 1.2 percent 2.0 percent respectively
• Public debt as a percentage of GDP is seen at 34.5 percent this year and 32.8 percent in 2020, versus earlier forecasts of 34.6 percent and 31.6 percent, respectively
• The unemployment forecast for this year was tweaked to 6.3 percent, from 6.4 percent, while the 2020 forecast was unchanged at 6.4 percent

To contact the reporter on this story: Amanda Billner in Stockholm at abillner@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo, Niklas Magnusson

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