Sweden’s PM Frontrunner Says She Has Room For More Stimulus

(Bloomberg) -- Sweden’s Finance Minister Magdalena Andersson, the frontrunner to replace the outgoing prime minister, said a robust economic recovery leaves room for an expansionary budget in the upcoming election year.

The Harvard-educated Andersson could become the first woman leader in the largest Nordic economy that’s coped with the pandemic much better than most rich peers, helped by robust state finances. Yet she would face a fragmented political system where agreements on changes needed to keep the welfare state afloat are increasingly difficult.

“We see a real recovery, and we also see that last year’s budget has had an effect,” Andersson said in an interview. “Now we want to take the next step, and ensure that we can emerge from this crisis stronger than we entered it.” 

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In next year’s budget, the government has room to spend 74 billion Swedish kronor ($8.5 billion) on reforms, she said. The finance ministry expects the economy to grow at 4.4% this year, somewhat less than in her ministry’s June forecast. Andersson, who has described herself as the most frugal finance minister in the European Union, said that despite running a deficit of 0.6% of GDP next year, she expects that the level of government debt won’t surpass 40% of the Sweden’s economic output. 

“It is thanks to the fact that I have been the most frugal in the EU that we have the opportunity to support the economy in this way,” she said. “The circle is complete.”

The spread of the delta variant and supply bottlenecks still threaten to slow the recovery, even as economists are increasingly confident that the Swedish economy will soon be back to its pre-pandemic growth trend. A report published earlier in the day showed that despite an unexpected drop in unemployment, joblessness remains at historically high levels.

Andersson, who immediately emerged as a favorite to replace Lofven after he announced his resignation, declined to comment on whether she’s willing to take the job. Opinion polls show that she has strong support among her party’s voters, but whether she agrees to be named Lofven’s successor or not, her main challenge in the autumn will be to find sufficient support in parliament for her spending plans. 

The Social Democrats currently control about a third of the seats in parliament in partnership with the Green Party, and will need at least indirect backing from two additional parties.

“Considering how difficult it is to get budgets through parliament, and how things may look after the next election, I would say there is a risk to the Swedish economy,” Swedbank AB chief economist Mattias Persson said on Wednesday.

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