Swedish economy remains strong and budget surplus grows

Press release 19 June 2018

The Swedish economy is growing at a good pace and the central government budget is expected to show a surplus of SEK 90 billion this year and SEK 69 billion next year. Despite the stronger budget balance the Debt Office makes no change to its borrowing in government bonds. Reducing borrowing from an already historically low level would further worsen liquidity in the market.

– The Swedish economy is continuing to do well and contributes to Sweden’s strong central government finances, but the main reason why we are increasing our forecast of the budget balance is the capital investments by companies in tax accounts, says Debt Office Director General Hans Lindblad.

In its new forecast, the Debt Office expects GDP to increase by 2.8 per cent this year and 1.8 per cent next year. Investments and household consumption make substantial contributions to GDP growth. Next year, however, housing investments are expected to decrease and business sector investments will grow more slowly.

Continued impact of capital investments in tax accounts

The new forecast of the budget balance in 2018 means an upward revision of SEK 10 billion compared with the previous forecast. For 2019 the upward revision is SEK 23 billion, which is largely due to a change in the assessment of the flow of capital investments in tax accounts. The expectations of an interest rate increase by the Riksbank have been postponed. This means that the previously expected outflow from tax accounts next year changes into an inflow.

– Capital investments in tax accounts are an expensive form of borrowing for the government. Our calculations show that the additional cost is SEK 1.7 billion compared with the Debt Office borrowing the same sums in the market. Moreover, these capital investments result in uncertainty in the management of the central government debt and reduce the scope for other borrowing, says Debt Office Director General Hans Lindblad.

Budget balance and central government debt (SEK billion)
Previous forecast in brackets                 20182019

Budget balance (corresponds to net borrowing requirement with
opposite sign)

90 (80)

69 (45)

Central government debt

1 243 (1 247)

1 127 (1 151)

Central government debt as proportion of GDP

26 (26)

22 (23)

Borrowing in government bonds stays at a very low level

The issue volume of government bonds stays at an annual rate of SEK 30 billion per year, the lowest level since 2000. Liquidity in the government bond market has continued to deteriorate since the previous forecast, when the issue volume was reduced. Lowering it even more would further worsen liquidity, resulting in higher borrowing costs and greater risk for the government.

Borrowing in inflation-linked bonds and T-bills is also left unchanged. Borrowing in foreign-currency bonds decreases, however. This is because the Debt Office expects that part of its lending to the Riksbank (Sweden’s central bank) will instead be refinanced with cash. This helps to reduce the central government cash surplus and to bring debt down.

The central government debt is expected to decrease to SEK 1 127 billion, corresponding to 22 per cent of GDP. This contributes to the Maastricht debt, which covers the whole of the public sector, reaching the ‘debt anchor’ of 35 per cent of GDP at the end of 2019.

Borrowing (SEK billion)
Previous forecast in brackets                 20182019

Government bonds

32 (32)

30 (30)

Inflation-linked bonds

9 (9)

9 (9)


20 (20)

20 (20)

Foreign currency bonds

88 (105)

44 (61)

– of which on-lending to the Riksbank

88   (105)

44   (61)

 Central government borrowing – forecast and analysis 2018:2


Robert Sennerdal, press secretary, 08 613 46 94