Sweden faces weaker public finances next year, debt office says

STOCKHOLM (Reuters) – A rapid slowdown in the Swedish economy will lead to weaker central government finances next year and to an increased borrowing requirement, the national debt office said in a statement on Thursday.

“Since the May forecast, we have seen inflation continue to rise and interest rates increase, while the economy is slowing down”, the Debt Office said in a statement.

“This creates an increased borrowing requirement for the central government, which the Debt Office is financing with short-term borrowing,” it said.

The Debt Office said the budget balance would be adversely affected by expected disbursements of electricity price compensation and said it saw a budget surplus of 91 billion Swedish crowns ($8.4 billion) this year and 27 billion in 2023, compared to 102 billion and 75 billion in the May forecast.

It forecast that Sweden’s gross domestic product would grow with 2.4% this year and fall by 1.0% in 2023, compared to gains of 2.2% and 1.8% respectively seen in May.

Inflation was seen averaging 7.8% this year and 5.4% next year compared to 5.5% and 2.8% in May.

It said that government debt was expected to decrease to 18% of GDP at the end of 2024, compared to 22% at the end of 2021.

($1 = 10.8660 Swedish crowns)

(Reporting by Terje Solsvik, editing by Anna Ringstrom)