Swedish Finance Minister Touts ‘Very Strong’ Labor Market

(Bloomberg) --

Sweden’s economic slowdown is coming as no surprise even as risks mount from the trade dispute and from Brexit, Finance Minister Magdalena Andersson said.

Andersson spoke in a phone interview as she’s preparing to present economic forecasts next week ahead of the budget next month, touting a labor market that “is still very strong” and a high level or resource utilization.

“We’re seeing a slowdown, it’s a slowdown that we’ve had in our forecasts for some time,” she said. “We’ve always known that the economic boom can’t last forever.”

Declining to get into details, the finance minister said that she’s “of course going to adjust fiscal policy to the current economic situation.”

Sweden’s economy is cooling fast, with employment growth stalling and sinking inflation challenging the nation’s central bank’s path out of negative interest rates. Like Germany’s, Sweden’s economy contracted in the second quarter, raising calls for the government to step in and provide a fiscal boost.

Andersson has run a tight ship since taking over as finance minister in 2014. Budget surpluses and tax increases have driven government debt down to the lowest level since the late 1970s. It now risks falling below the so-called debt anchor, which stipulates that debt shouldn’t drop below 35% of GDP. Andersson also has to adhere to a surplus target of 0.33% of GDP.

Read more: Negative Swedish Yields Offer ‘Extreme’ Funding Opportunity

But with the yield on Sweden’s 10-year government notes having fallen below zero, bank economists are calling on the government to increase borrowing to stimulate the cooling economy.

The finance minister brushed off calls to unleash any major fiscal initiatives, or take advantage of the fact that Sweden can now borrow at negative rates into 10 years.

“The debt anchor is a benchmark,” she said. “But should the economy deteriorate there is still room to act. But the resource utilization in the economy is still rather high.”

To contact the reporter on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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