Sweden Faces Economic Risk of Spending Too Little Now

(Bloomberg) -- The radical reform of Sweden’s budget process in the mid-1990s turned a crippling deficit into a significant surplus and instilled a high degree of financial discipline into the government. That’s left the country well positioned to weather the impact of the Covid-19 crisis, and even with a huge two-year stimulus package, public debt will stay close to 40% of gross domestic product, according to Bloomberg Economics. In fact, the biggest issue is not that Sweden lacks the financial muscle, but that it may provide too little stimulus, which is likely to keep growth and inflation at a lower trajectory for longer.

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