Sweden Touts ‘Incredibly Strong’ Jobs Market Before New Forecast
(Bloomberg) -- Sweden’s Finance Minister Magdalena Andersson said her fiscal prudence will serve the country well as growth cools at home and global risks mount.
Andersson is now looking over her economic forecasts and preparing the supplemental spring budget.
“It remains to be seen exactly what we’ll end up with, but several other forecasters have revised down growth for the current year,” she said in an interview Friday in Stockholm. “On the other hand, we can see that the labor market is doing well, with a high employment rate. So it’s incredibly strong.”
Reappointed in January in a new Social Democrat-led government backed by centrists parties, Andersson says Sweden now faces more “normal” growth rates after an economic boom over the past years, which was helped by record immigration and unprecedented monetary policy stimulus.
Through it all, Andersson kept a close eye on Sweden’s purse strings even as unemployment has hovered far above rates in comparable countries and inflation showed few signs of becoming problematic. In its latest forecasts from November, the Finance Ministry predicted surpluses of above 1 percent of gross domestic product this year. The fiscal framework calls for a 0.33 percent surplus, which was this year adjusted from 1 percent.
For those looking for fiscal fireworks now, Andersson offers little hope. “We’ll stick to the fiscal policy framework,” she said.
Sweden’s debt office also last month predicted deficits for next year as cooling growth limits tax revenue.
Looking back, Andersson acknowledges that she probably could have spent more money than she has over the past years after the strength of public finances “surprised upwards” in 2016 and 2017. However, she says she won’t use that as an excuse to spend more now in a year where the scope for further reforms has already been used up.
“I would never carry out a fiscal policy where I hope that the forecasts I present will be wrong,” she said.
Sweden’s economy is slowing, with consumer confidence near a six-year low amid wobbly stock markets and a drop in housing prices over the past year. Manufacturing is also cooling even though exports are being helped by a tumble in the Swedish currency.
The krona is the worst performing major currency this year amid growing speculation the central bank will need to keep its benchmark rate below zero also through this year. A growing chorus of economists have urged authorities to do something about the krona’s slide.
Andersson declined to discuss the impact of fiscal policy on the currency, deferring to the central bank. “When I hear analysis of it, people often cite monetary policy as a reason,” she said.
Tight spending and growing tax revenue over the past years also means that Sweden’s debt level could go too far below the so-called anchor of 35 percent of gross domestic product.
If that happens, Andersson said “we’ll have to try to explain to parliament why we haven’t spent more money.”
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