Government opens its purse

Finance Minister Magdalena Andersson promised a record election budget when she met journalists yesterday prior to budget negotiations in Harpsund. The investments so far presented for welfare, the police and defence amount to around SEK 10 billion, and she is willing to consider more reforms.

However, the National Institute of Economic Research’s (NIER) Ylva Hedén Westerdahl commented: “We are surprised that the government has so much room for reform. In our forecast, it would mean that they are moving away from the new surplus target.” She points out the government views the underlying potential of the economy more positively.

The Liberals’ economic spokesperson Mats Persson focused on what he sees as a lack of job reforms, which means new arrivals will not get into employment. “It is remarkable that a Social Democrat government is allowing a new underclass to develop,” he says.

Concern boom may end too soon

The National Institute of Economic Research, NIER, (Konjunkturinstitutet) forecasts that the Swedish economy will continue to strengthen and that GDP will increase by 3.6% this year, followed by 2.1% in 2017 and 1.9% in 2018. The unemployment rate will fall to 6.3% in 2017 before increasing again, as more refugees who have been granted residency are included in the statistics.

NIER’s Director General, Mats Dillén, says that educational measures and subsidised forms of employment will be needed to bring down the unemployment rate in this group. The social partners should also look at wage structure to ensure that it does not become to expensive to hire people with a low level of education and little experience of the Swedish labour market, he comments.

The boom in the economy and the deviation from the surplus target for government net lending indicate that fiscal policy should be tightened already in 2017. Mats Dillén point outs, however, that the surplus target is under review and the growing challenge of integration needs to be taken into account, saying; “The situation we have with immigrants underlines the risks of tightening [policy, ed.] excessively so that the economic boom comes to an end too soon”.