The Swedish government is to pump 105 billion kronor (US$12 billion) into the economy next year through tax cuts and spending in a record giveaway aimed at getting the economy back on its feet after a COVID-19 pandemic-induced slump.
Sweden’s economy is to shrink by about 4.6 percent this year, the minority coalition said in its budget yesterday, a milder hit than many other European countries, some of which are being forced to reimpose COVID-19 restrictions after a surge in new cases.
“Economic policy is going into a new phase,” Swedish Minister of Finance Magdalena Andersson told reporters. “It is about a record-large budget to restart the Swedish economy: 100 billion so that we can work our way out of the crisis.”
The Social Democrat and Green coalition said that the budget would focus on boosting jobs, welfare and supporting the switch to a carbon-free future.
Most measures, agreed with two small, center-right parties that help keep the coalition in power, were already known.
Individuals and companies would get a tax cut, and local authorities and welfare services more cash, while about 10 billion kronor would go toward fighting climate change.
The budget is expected to create about 75,000 jobs.
While Sweden looks to have got off relatively lightly economically in the short term, analysts have cautioned that it is too early to pick the longer-term winners and losers from the pandemic.
Much would depend on how government largesse, including Europe’s 750 billion euro (US$885 billion) recovery fund, is spent.
Sweden also faces a number of structural challenges, not least in the labor market where unemployment among young people and immigrants is uncomfortably high.
A dysfunctional housing market also threatens long-term economic stability, while funding the country’s comprehensive welfare model as society as a whole ages would require a huge increase in productivity.
The government has promised to keep the taps open, at least for the next few years — tax cuts and spending is to boost the economy by 85 billion kronor in 2022.
However, with a general election due that year, longer-term policies remain unclear.
The last national vote resulted in a virtual stalemate between the center-left and center-right blocs, and there is little evidence that voters are any clearer about what they want now.
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