By Emese Bartha
Sweden’s economy and central government finances are recovering faster than expected from the pandemic, reducing the country’s borrowing requirements and its bond issuance needs, the National Debt Office said Wednesday.
The NDO expects Sweden’s budget balance to already be positive this year and it sees the surpluses continuing to grow during its forecast horizon, it said, adding that the budget balance improves by a combined 55 billion Swedish kronor ($6.38 billion) in 2021 and 2022 compared to its estimate in the previous borrowing review in May.
“The economic recovery has been surprisingly strong so far this year and will gain further momentum after the removal of the pandemic restrictions,” Hans Lindblad, director general of the NDO said. “We also see a brighter situation in the labour market, despite expecting only a slow decrease in the number of long-term unemployed,” he added.
The NDO expects Sweden’s gross domestic product to grow 4.2% in 2021, up from 3.5% expected previously. Next year’s GDP growth is seen at 3.5%, slightly lower from 3.7% expected before, while growth will slow to 1.8% in 2023, the NDO said.
The NDO now forecasts a budget surplus of SEK22 billion in 2021 versus a SEK4 billion deficit it expected previously. It raised its forecast for the budget surplus to SEK94 billion in 2022 from SEK65 billion. For 2023 it forecasts a surplus of SEK107 billion, it said.
The stronger budget balance allows cuts in Sweden’s bond issuance, with nominal government bond issuance expected at SEK83 billion in 2021, down from SEK85 billion expected before. For 2022, the NDO cut the issuance target to SEK50 billion from SEK70 billion, and for 2023 it plans SEK50 billion issuance.
The issuance of inflation-linked bonds remains unchanged at SEK21 billion in 2021, but is lowered to SEK13 billion from SEK21 billion in 2022. For 2023, the NDO plans SEK13 billion linker issuance.
Given the lower borrowing requirements, the NDO cancels the bond issuance in foreign currency planned for this year.
Write to Emese Bartha at emese.bartha at [email protected]