Crisis to turn Sweden’s budget surplus into deficit

Sweden announced on Tuesday it was cutting its 2008 budget surplus forecast, saying the financial crisis would result in a deficit next year rather than the surplus forecast earlier.

“Swedish central government finances are deteriorating. The current financial crisis is dampening economic growth and will make it more difficult to sell state assets,” the National Debt Office (Riksgälden) said in a statement.

“Together this means that the surpluses of recent years are turning into deficits and that central government borrowing is increasing,” it said.

The 2008 budget surplus was put at 148 billion kronor ($19 billion), compared to a June estimate of a record 163 billion kronor, of which 86 billion kronor was expected to come from the sale of state assets.

Sweden’s centre-right government which came to power in 2006 has launched a vast privatization programme aimed at selling assets worth 150 billion kronor in six state-owned companies over three years.

So far, the government has sold part or all of its stakes in four of the six companies, raking in some 116 billion kronor.

For 2009 however, the debt office said it only estimated three billion kronor in such income “due to the financial turbulence,” and did not expect any at all in 2010 “since it will probably take some time before the situation in the financial markets improves.”

The debt office said it expected a 2009 budget deficit of 23 billion kronor, compared to its June forecast of an 83 billion kronor surplus. The deficit was expected to widen in 2010 to 35 billion kronor.

Central government debt was estimated at 1.12 trillion kronor at the end of 2008, up from the 1.01 trillion previously announced.

It was expected to decline to 1.06 trillion kronor at the end of 2009 before rising again to 1.10 trillion in 2010, corresponding to 33 and 32 percent of gross domestic product (GDP) respectively.

At the end of August, the government said it expected growth of 1.5 percent this year, down sharply from 2.6 percent in 2007 and 4.1 percent in 2006.

The government predicted growth of 1.3 percent in 2009.