Budget Consolidation Needed in 2017 and 2018 to Safeguard Buffers Sweden Has Weathered the Crisis Well
Total Page:16
File Type:pdf, Size:1020Kb
2014 Press release 23 August 2014 Ministry of Finance Budget consolidation needed in 2017 and 2018 to safeguard buffers Sweden has weathered the crisis well. Its public finances are among the strongest in the EU. Weak international growth will now result in a slightly slower recovery in Sweden, according to the Ministry of Finance August forecast. Alongside increased expenditure at the end of the electoral period, this will necessitate budget consolidation. To safeguard the recovery, this should wait until the economy gradually returns to normal in 2017 and 2018. Budget consolidation will allow net lending to return to a one per cent surplus in 2018. Despite unrest internationally, Sweden remains strong and has the capacity to meet future challenges. Growth is also expected to continue to be stronger than in the majority of comparable countries. Sweden has higher employment rates and lower long-term unemployment than the vast majority of comparable countries. Download Employment will also increase in the years to come and unemployment will gradually decline. Sweden's strong public finances have made it possible to pursue a proactive policy to counteract the potential impact of the Key figures forecast August international crisis on households and businesses. Fiscal policy has been well-balanced and provides support 2014 (pdf 320 kB) for the gradual recovery that is now taking place. "It is important that the public finances remain strong. Sweden must be able to meet future crises from a position of strength, and we must make sure that we continue to have safety margins in the future," says Minister for Finance Anders Borg. Safeguarding Sweden's strong position in the years to come will require responsible action. Reforms must be financed krona for krona. Budget consolidation towards the end of the electoral period is also deemed necessary if Sweden is to continue to stand strong in an uncertain world. The international prospects for growth have deteriorated this summer in the EU, and also in the US and Japan. This development will affect Swedish exports and willingness to invest, both this year and next. Growth will therefore be more subdued than previously forecast. The Swedish economy is expected to gradually recover, but the recovery is still uncertain. The risk outlook remains negative, with a risk of weaker growth. This requires fiscal policy to be designed so as to consolidate the economic recovery while at the same time safeguarding the safety margins in the public finances by returning net lending to surplus. The forecast for net lending is now being revised downwards compared with Ministry of Finance forecasts during the spring and summer. Net lending is being affected by the subdued economic outlook and unexpected changes in revenue and expenditure. The weak global economy is subduing export industries and also contributing to lower tax revenues. With more people seeking protection from war and persecution, the reception of refugees is increasing, bringing a need for additional resources. In order to maintain good buffers and the ability to protect jobs and welfare when the next crisis comes along, the public finance surplus should reach 1 per cent of GDP in 2018. According to the current forecast, budget consolidation to the tune of around SEK 25 billion will be needed in the next electoral period. The design of fiscal policy should take account of the fact that resource utilisation will remain low in the next few years. To protect jobs and growth, fiscal policy should therefore not be taken in a direction that impedes the economic recovery during the period 2014-2016. Budget consolidation should be implemented in 2017 and 2018 when it is estimated that the economy will return to normal. If any new serious disturbances affect the Swedish economy and it moves further out of balance, budget consolidation measures should be postponed. If the recovery takes place quicker than expected, on the other hand, the budget consolidation can be brought forward. The Government's budget consolidation in 2017 and 2018 The Government is in agreement that budget consolidation will primarily take the form of revenue increases, but it will also be necessary to limit increases in expenditure. One important premise is that budget consolidation must not affect core welfare services. Rather, fully financed reforms should be undertaken in the medical care, education and social services sectors to improve quality. It is also vital that budget consolidation does not take place through increased taxation affecting employment and the business climate. A number of measures should be taken on the income side. The level of taxation from the financial sector should increase. The financial sector is currently exempt from value added tax in the EU Member States, which means that the level of taxation is lower than for other parts of the business sector. One starting point should be to reduce taxation disparities by raising social security contributions in the financial sector, as has been done in Denmark. It is important to maintain the legitimacy of the tax system. At present, the commercial property sector is taxed less heavily than other parts of the business sector. Tax planning through packaging of properties can be counteracted. An inquiry will be appointed. To further prevent fraud, the levels of tax and customs surcharges should be raised. The adaptation of the transport sector is an important part of environment policy. Environmental governance should be strengthened by raising taxation on cars and vehicles with particularly high greenhouse gas emissions. Further environmental taxes, such as a chemicals tax and a tax on fluorinated greenhouse gases, should be introduced. The nitrogen oxide charge should also be converted into a tax. The Government also intends to raise taxes on alcohol and tobacco with a view to improving public health. It is important to pursue responsible policies that limit future expenditure increases. Employment is currently increasing strongly and the Ministry of Finance forecasts indicate an improvement in the labour market situation. It will therefore be natural to adapt the scale of labour market programmes further down the line. Measures should be taken to reduce ill health and sickness absence in the longer term. These may include measures to combat ill health among women and to reinforce work on mental health. It is also vital to maintain good cost controls in various benefit systems by combating fraud and overuse. Central government administration should be made more efficient. The annual appropriation increases in the price and salary indexing system should also be limited from now on. An exception should be made for the defence area, to avoid undermining the strengthening of the Swedish Armed Forces currently under way. Costs can also be reduced by more thorough scrutiny of government agencies' costs for premises and their location. Contact Caroline Karlsson Press Secretary to Anders Borg +46 8 405 80 13 +46 72 744 23 30 e-mail to Caroline Karlsson, via the Senior Registry Clerk Evin Khaffaf Press Secretary to Anders Borg +46 8 405 40 23 +46 70 283 95 97 e-mail to Evin Khaffaf, via the Senior Registry Clerk Press release 04 July 2014 Ministry of Finance Sluggish recovery gradually strengthening The Swedish economy is expected to continue its gradual recovery after the longest and deepest recession Sweden has experienced since the crisis of the 1930s. This is the picture presented by the Ministry of Finance's new economic forecast. The recovery has been sluggish because of the continued subdued state of the global economy. Little by little, growth will pick up in the years ahead. The public finances will strengthen as the economy returns to normal. The global economic recovery is expected to continue in 2014, though at a slightly weaker rate than is usual in economic upturns. As a result, Sweden will continue to receive relatively little external impetus. Growth is expected to reach 2.5 per cent this year and 3.1 per cent next year. The fact that the economy is growing Download despite the weak international environment is mainly attributable to household consumption. Key indicator table, forecast july 4th (pdf 66 kB) The risk of weaker growth still predominates, primarily because of the outlook for the euro area. While little risk is seen of a sharp downturn, the risk of protracted stagnation remains. Employment is continuing to rise and unemployment is falling. Sweden's public finances are still among the strongest in the EU and are expected to strengthen further as the economy returns to normal. "The weak international environment affects us, but we are in a stronger position than many other countries because we have safeguarded our public finances. The infrastructure and housing investments announced this week by the Government will improve the prospects for jobs and growth and the chances of a secure and lasting recovery," says Minister for Finance Anders Borg. Contact Caroline Karlsson Press Secretary to Anders Borg +46 8 405 80 13 +46 72 744 23 30 e-mail to Caroline Karlsson, via the Senior Registry Clerk Evin Khaffaf Press Secretary to Anders Borg +46 8 405 40 23 +46 70 283 95 97 e-mail to Evin Khaffaf, via the Senior Registry Clerk Ylva Hedén Westerdahl Head of Forecasts 08-405 31 22 Press release 09 April 2014 Ministry of Finance Spring Fiscal Policy Bill 2014: Knowledge for a stronger workforce In this Spring Fiscal Policy Bill, the Government is presenting initiatives to promote knowledge for a stronger workforce. A total of SEK 3.8 billion will be allocated to these measures in 2015. In addition, initiatives totalling SEK 1.3 billion are being presented aimed at increasing healthcare access and skills and further improving the business climate. As the recovery becomes more stable, fiscal policy will enter a new phase which will see public finances return to surplus.