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Sweden Budget Deficit To Widen On Support Measures

Sweden’s budget deficit is set to widen this year as government has taken support measures to combat downturn caused by the coronavirus, or Covid-19, the National Debt Office said Tuesday.

The budget deficit is forecast to widen to SEK 402 billion this year before narrowing to SEK 76 billion next year.

The Debt Office is meeting the deficit by increasing borrowing in all debt instruments.

“This is an exceptional situation we are in, with great uncertainty, but the Debt Office has good preparedness to increase borrowing,” Director General Hans Lindblad said.

Earlier, the government had forecast a budget shortfall of SEK 14 billion each for 2020 and 2021.

The government forecast GDP to fall 6.5 percent this year and expand 4.5 percent in 2021. Although there is a recovery next year, it is not sufficient for GDP to return to pre-crisis levels during the forecast period, debt office said.

The GDP forecast for 2020 was revised from +1 percent and that for 2021 from +1.8 percent projected in February.

The central government debt is projected to increase to SEK 1.556 trillion at the end of 2021 from SEK 1.113 trillion at the end of 2019. As a share of GDP, central government debt rose to 31 percent.

The Maastricht debt is expected to increase to 45 percent at the end of next year from around 35 percent of GDP in 2019.

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