New Swedish govt cuts fuel taxes, boosts defence in first budget

Sweden's new right-wing government will raise spending by around 40.4 billion Swedish crowns ($3.71 billion) in 2023, it said on Tuesday, in an outline of its first budget since winning a general election in September. The main measures in the budget included 6.7 billion crowns to cut fuel taxes, 6 billion for local authorities and 4.2 billion extra for defence with a saving of 7.3 billion on overseas aid.

Sweden's new right-wing government will raise spending by around 40.4 billion Swedish crowns ($3.71 billion) in 2023, it said on Tuesday, in an outline of its first budget since winning a general election in September.

The main measures in the budget included 6.7 billion crowns to cut fuel taxes, 6 billion for local authorities and 4.2 billion extra for defence with a saving of 7.3 billion on overseas aid. Many of the measures were already known.

While the incoming government inherits strong public finances and a robust economy that has bounced back quickly from the pandemic, it faces a number of challenges. Election promises to cut income taxes and raise spending will be hard to deliver with the economy heading into recession and the government committed to relieving the worst effects of the cost of living crisis on households and businesses.

The government expects the economy to shrink 0.4% next year. Banking group Nordea said this week it saw a 2.0% contraction. Sweden, with one of Europe's lowest levels of public sector debt, has room to boost spending to cushion the downturn. But turning on the fiscal taps risks pushing inflation - at close to 10% in October - even higher.

That, in turn, would force the central bank to raise rates further, adding to the long term pain for households and businesses. ($1 = 10.8908 Swedish crowns)