Press release 15 April 2008
Ministry of Finance

Responsible economic policy for employment and growth - Security for the future

In the 2008 Spring Fiscal Policy Bill, the Alliance Government sets out its economic and budget policy guidelines. To meet the challenges facing Sweden in both the short and long term and to secure our future development, the Government announces measures that will strengthen Sweden´s opportunities for growth and lead to permanently higher employment and GDP. The Government policy will also improve conditions for knowledge in preschool and school, strengthen welfare provision and put Sweden in a better position to meet the threat of climate change.

The impact of a policy for full employment and economic growth is steadily becoming more obvious. During 2007, the number of people excluded from employment fell by 121 000, the largest reduction in the close to forty years that statistics have been available. One clear step forward is that the 30-year trend increase in the number of people receiving activity and sickness compensation was broken in 2007. By 2010 exclusion is expected to have declined by over 190 000 people.

- More and more people are getting jobs while fewer and fewer are unemployed, on sick leave or in labour market measures. This is gratifying for a government pursuing the overall objective of getting more people into jobs and reducing exclusion, says Minister for Finance Anders Borg.

Responsible policy

The international economy is increasingly dominated by turbulent financial markets. Since the Budget Bill last autumn, the storm clouds have gathered and somewhat darkened, worsening the outlook for growth. The Swedish economy is expected to grow by an average of 2.3 per cent between 2008 and 2011. However, given the considerable uncertainty at present, economic policy should be characterised by caution and scope should be maintained to meet unforeseen developments.

The Government´s assessment is that the target of a one per cent surplus in net lending will be exceeded by a broad margin in the coming years. Both actual and structural net lending are expected to show average surpluses of over 3 per cent of GDP between 2008 and 2011. The national debt continues to diminish and is expected to be 15.3 per cent of GDP in 2011.

Rather more muted demand over the next few years will reduce the risk of overheating that the Government predicted in the autumn. Fiscal policy has kept up a tightening stance to prevent overheating and this has increased the structural surpluses in public finances. The Government intends to ease the tightening somewhat, while maintaining a responsible fiscal policy.

Initiatives for the future

Despite the strong results that have been observed, employment is still too low and exclusion too high. The Government therefore wants to implement further initiatives that will stimulate both the supply of and the demand for labour. The scale of the initiatives in different policy areas will be determined by the strength of the public finances and the scope for providing economic stimulus that the economy allows. With the right structural reforms, the scope for new initiatives may be greater than otherwise, as such reforms contribute to a more balanced use of resources and boost tax revenue through permanently higher employment. The Government´s overall assessment, based on the fiscal policy framework and the current forecast for economic developments, is that there is now some scope for new reform initiatives in the 2009 and 2010 budget years.

Reducing exclusion, which was permitted to grow large over a prolonged period, and getting more people into work, thereby strengthening possibilities for growth, has been and continues to be the Government´s most important task. The Government´s proposed guidelines adopt a broad approach and include actions in a range of policy areas. The Governments intends to propose measures in the Budget Bill for 2009:

• Measures to enhance incentives to work.
• Investments to improve the infrastructure.
• Better conditions for high-quality research.
• Better conditions for enterprise and competition.
• Enhanced knowledge in school and preschool.
• Improved integration of people born abroad.

Strong public finances also make further improvements in welfare possible:

• The economic situation of the least well-off pensioners will be improved.
• Psychiatric care will be strengthened.
• The conditions for an effective and efficient judicial system will be improved.

The Government also intends to propose measures to create an effective energy policy and action to meet the threat of climate change and improve the environment. In addition, further proposals will be presented to create conditions for an effective, efficient and appropriate defence.