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Swedish GDP seen picking up, threat from global slowdown

STOCKHOLM (Reuters) - Sweden's economy is expected to pick up speed this year and the next, but there are risks from slowing global growth, Finance Minister Magdalena Andersson said on Monday.

Andersson, whose centre-left Social Democrat party won a September election but without an overall majority, inherited an economy growing faster than most of European peers but at risk should trading partners such as Germany hit the buffers.

"The Swedish economy is expected to recover in 2015," Andersson said. "However, there are still substantial unused resources in the economy and the risk of weaker growth predominates."

The economy is expected to expand 2.1 percent this year and 3.0 percent in 2015. The previous government had a forecast of 1.9 percent for 2014 and 3.0 percent for next year.

Sweden's economy grew 1.6 percent in 2013.

The Social Democrats became Sweden's biggest party after September's election, but even with the Green Party as coalition partners they are short of a majority in parliament and the government is seen as one of the weakest in decades.

The coalition will present a budget in a couple of weeks. It has said it will raise income taxes for the well-off and end tax breaks for companies employing people under 26 to fund investment in welfare services and schools and a better deal for pensioners.

Andersson said the government's room for generous spending measures was limited.

"We are going to finance every reform measure crown-for-crown," she told reporters echoing the words of her Moderate party predecessor, Anders Borg.

"The room for (unfinanced) measures is zero. However, we are going to raise a number of taxes and make a number of other adjustments which mean that we can make a number of reforms."

Andersson forecast public finances would remain in deficit until 2017 and that the government would not reach its target of a 1 percent surplus during the coming four years.

(Reporting by Johan Ahlander and Johan Sennero; Editing by Simon Johnson and Catherine Evans)