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Tuesday 06 March, 2012


Budget balance despite weak economy

Budget balance despite weak economy

The central government budget will largely be in balance in the next two years, despite weaker growth. The deficit this year will be a moderate SEK 11 billion and next year will bring a modest surplus of SEK 3 billion, according to the latest Debt Office forecast. Hence the economic slowdown will have a limited impact on both central government finances and borrowing.

Our new forecast for the budget balance in 2012 shows a deficit of SEK 11 billion. For 2013 we expect a surplus of SEK 3 billion.

Weak domestic demand and weak demand in our key export markets are reducing growth prospects this year and unemployment is rising. This affects central government finances through reduced tax revenues and increased labour market expenditure.

Our forecast assumes that the debt problems in the euro zone will be dealt with in an orderly although protracted process and that confidence in the economy will grow gradually in the course of 2012.

As confidence returns, consumption and investment will recover and the economy will grow faster. However, there is a risk that continued fiscal austerity in the euro zone will restrict the pace of recovery.

Slight increase in central government borrowing

Central government borrowing will increase by SEK 33 billion this year and 27 billion next year compared with the previous forecast, since the economy is developing somewhat less vigorously than we previously anticipated. Nominal government bonds account for half the increase. Funding in T-bills will also be greater. Bond borrowing in foreign currency will also increase somewhat, due to our funding a larger part of on-lending to the Riksbank on the bond market.

Increased government bond borrowing

The issue volume of nominal government bonds will increase by SEK 15 billion to SEK 50 billion in 2012 compared with the October forecast. In 2013 we plan to borrow SEK 53 billion in government bonds, an increase of SEK 20 billion.

Adjustment to the greater issue volume will be made by increasing the number of auctions. We are now reintroducing the auctions that were removed from the issue plan when we revised the borrowing forecast last year. We plan to maintain the issue volume of SEK 2.5 billion per auction in 2012 and 2013.

Central government debt largely unchanged

Central government debt will be about SEK 20 billion greater in 2012 compared with our previous forecast. At the close of 2012 we expect central government debt to be SEK 1 143 billion or 32.8 per cent of GDP. In 2013 the debt will be largely unchanged, though it will continue to fall relative to GDP.

For more information, please contact:

Håkan Carlsson, budget forecast, +46 8 613 47 33

Thomas Olofsson, borrowing, +46 8 613 47 82

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Source: Riksgälden via Thomson Reuters ONE


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