Article from Ministry of Finance

The 2020 Spring Budget in five minutes

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The COVID-19 pandemic is a serious threat to people’s lives and health. Serious economic consequences will follow in its wake. In five additional amending budgets, the Government, the Centre Party and the Liberal Party have presented proposals for active measures to limit the spread of the virus and mitigate the economic effects on society. Today, the Government presents the 2020 Spring Fiscal Policy Bill and the Spring Amending Budget for 2020 with additional measures. All of these measures total over SEK 100 billion.

Illustration: Jan Gerscher/Government Offices of Sweden

Stop the spread of the virus and mitigate the economic effects on society

During spring 2020, the Government has presented a large number of measures to stop the spread of the virus and mitigate the economic effects on society of the outbreak. The measures are intended to provide greater security for those affected by the pandemic by limiting the spread of the virus, combating the effects on businesses and jobs and providing financial security and transition opportunities for those who become unemployed. They are also intended to create the conditions for recovery after the crisis.

The spread of the virus must be limited

Everyone working in health care and infectious disease control must have the tools and resources needed to manage and limit the spread of the virus. Through their responsibility for health and social care, the regions and municipalities have a crucial role in fighting the spread of the virus. The local government sector is therefore being given funding, both targeted and general, to deal with the immediate additional costs resulting from the outbreak. The performance requirements in the ‘waiting list billions’ are being removed temporarily. Government agencies participating in action to limit the outbreak must also have the resources they need.

The risk of health care overload decreases the more the spread of infection is limited. The sick pay standard deduction and the medical certificate requirement during a sick pay period have been removed temporarily and the resources for disease carrier’s allowance have been increased.

The impact on Swedish jobs and businesses must be pushed back

The economic impact of the coronavirus is hitting the business sector very hard. Many business owners are experiencing great uncertainty and do not know whether their business will survive or what will happen to their employees. To support viable companies during the crisis and reduce the number of jobs lost, the Government has presented several crisis packages containing measures to reduce costs, strengthen liquidity and improve access to financing.

The Government has proposed a system of support for short-term layoffs. The aim is for more businesses to survive and fewer employees to lose their jobs. A temporary reduction of employers’ social security contributions and the general salary contribution for the first 30 employees for four months is in place. The social security contributions of self-employed people have also been reduced. Central government will temporarily cover employers’ sick pay costs, and sole traders with an F-tax card will be compensated through sickness benefit on days 1 to 14 of their sickness period.

Security and transition for people who become unemployed

Despite the extensive measures the Government has taken to support viable businesses, many people are going to lose their jobs. In view of the present economic situation several temporary changes have been made in unemployment insurance to make it easier to qualify for benefit and to ensure that this insurance provides greater financial security for people who become unemployed. In addition, more measures are proposed to provide good transition opportunities. More funding is proposed for Arbetsförmedlingen (the Swedish public employment service) to deal with higher unemployment and ensure equivalent service levels throughout the country.

Funds are also being provided to enable more people to participate in measures leading to jobs, such as employment training, extra jobs and support and matching services. In addition, it is proposed that more places be provided at universities and other higher education institutions, higher vocational education, vocational adult education and folk high schools.

Continued fight against societal problems

Looking beyond the ongoing pandemic, unemployment, climate change, the growing needs in welfare provision, the gap between urban and rural areas, shortcomings in integration, learning outcomes in schools and crime are societal problems that must be addressed through further reforms.

As soon as the fight against the virus outbreak permits, fiscal policy will be aimed at supporting a rapid recovery. Businesses that use short-term layoffs and various forms of liquidity support must be able to quickly return to full resource use.

Sweden is to become the world’s first fossil-free welfare nation. Sweden will continue to take a leading role at both national and international level in implementing the Paris Agreement and the 2030 Agenda. The Government proposes an expansion of support for the installation of solar cells to enable more people to be granted support. The Government also proposes investment in green jobs and a reinforcement of support for the production of biogas.

Our universal and tax-financed welfare system supports a high level of labour force participation, contributes to social equality and gender equality, and paves the way for improved life chances for everyone. Regions and municipalities are being given additional general reinforcements of their resources to cope with the strained economic situation. The Government proposes providing SEK 20 billion of fresh funding in 2020, of which SEK 12.5 billion is permanent additional funding for the local government sector. These additional resources will contribute to good access to health care, schools, social care and public transport of high quality.

The causes of crime must be addressed and organised crime must be broken. The Government therefore proposes strengthening the judicial system by providing additional funding for agencies including the Swedish Prison and Probation Service, the National Board of Forensic Medicine, the National Board of Institutional Care and the Swedish courts, including the migration courts. Additional funding is also proposed for the Swedish Security Service, the Swedish Data Protection Authority and Swedish Customs.

The virus outbreak can exacerbate the situation of people subjected to domestic violence or to honour-related violence and oppression. Funding is therefore being provided for organisations working with children in vulnerable situations and organisations working with women and children subjected to violence.

In troubled times it is even more important to stand up for democracy, the rule of law and human rights. The Government intends to provide permanent additional funding for state support for the media.

These proposals are based on a political agreement between the Swedish Social Democratic Party, the Centre Party, the Liberal Party and the Green Party.

Economic measures in response to COVID-19

Amendments to the extra amending budgets and proposals in the Spring Amending Budget

The total amending measures for 2020 that the Government has proposed or is proposing in this Spring Amending Budget amount to SEK 107 billion and is expected to weaken public finances by SEK 95 billion. Moreover, loan guarantees are expected to amount to SEK 230 billion, while measures to strengthen the liquidity of businesses are expected to amount to SEK 335 billion.

Measures and proposals in the extra amending budgets and the Spring Amending Budget (SEK billion)
The spread of the virus must be limited 7
Impact on Swedish jobs and businesses must be pushed back 67
Security and transition for people who become unemployed 11
Continued fight against societal problems 22
Other items 1
Total 107
Adjustment for impact on public finances -12
Total impact on public finances 95
Note: The amounts may not sum to totals because of rounding.

Measures in additional amending budgets in spring 2020 and proposals in the Spring Amending Budget for 2020

Government’s assessment of the economic outlook

The virus outbreak has had a serious impact on economic growth, both in Sweden and around the world. The level of uncertainty in the forecast is very high. The global economy, like the Swedish economy, is expected to enter a recession with strongly negative GDP growth in 2020. The considerable numbers of redundancy notices and bankruptcies reported so far reinforce the expectation that the labour market will become significantly weaker, with falling employment and rising unemployment. The recovery phase is expected to continue for several years, with resource utilisation far below its normal level in the coming years.

The comprehensive fiscal policy measures and falling tax revenues are expected to result in large deficits in public finances. It is estimated that general government net lending will drop this year to -3.8 per cent of GDP. However, Sweden’s historically low debt ratio provides a stronger initial position than many other countries, and the Swedish economy is well equipped to deal with any recession that may follow in the wake of the virus outbreak. As the economy gradually recovers, once the crisis has abated, public finances are also expected to become stronger.

Key indicators forecast 15 April 2020
2019 2020 2021 2022 2023
GDP, calendar adjusted 1.3 -4.2 3.3 3.4 3.3
Employment, aged 15–74 0.7 -1.6 0.6 1.2 2.2
Unemployment, % of labour force aged 15–74 6.8 9.0 9.0 8.4 7.0
General government net lending, % of GDP 0.4 -3.8 -1.4 0.1 1.5
General government structural balance, % of potential GDP 0.4 -0.9 0.6 1.2 1.7
Note: GDP and expenditure components refer to constant prices.
Sources: Statistics Sweden and own calculations

Key indicators forecast 15 april 2020 (pdf)

Key indicators forecast 15 April 2020 (Excel)

Expenditure ceiling should be raised

In addition to the measures already proposed due to the spread of the virus, it is difficult at the current time to predict what needs for central government measures may arise in the future in terms of expenditure. Given the exceptional situation, the Government considers that it is important to be able to take necessary measures, which the stipulated expenditure ceiling does not currently permit. The Government therefore considers that it is justified to raise the level of the expenditure ceiling in 2020 by SEK 350 billion to SEK 1 742 billion.

Passage through the Riksdag

After the Spring Fiscal Policy Bill and the Spring Amending Budget have been presented to the Riksdag, the members of the Riksdag have two weeks to present motions containing alternative proposals. Proposed guidelines for economic policy and budget policy included in the Spring Fiscal Policy Bill are processed by the Committee on Finance. The proposed amending budget, including changes in appropriation frames, revenue estimates and any legislative proposals, is also processed by the Committee on Finance.
The Riksdag will take a decision on the budget bills in June (the tentative date of decision is 17 June 2020).