Article from Ministry of Finance

The Budget for 2021 in five minutes

Published

On 21 September 2020, the Government presented its budget proposal for 2021 to the Riksdag.

Photo: Ninni Andersson/Government Offices of Sweden

The Government proposes temporary measures to restart the Swedish economy, but also long-term reforms that will help solve societal problems. The proposals are based on an agreement between the government parties, the Centre Party and the Liberal Party.

Economic situation in Sweden is serious but fiscal scope is considerable

Indicators suggest that the Swedish economy bottomed out in the spring; it is expected to recover in the second half of 2020, just like the global economy in general. The Government assesses, however, that it will be several years before the recession is over. But Sweden is in a good position to manage the recession, as its level of public debt is among the lowest in Europe.

The recession – but also the Government’s measures – mean that public finances are expected to weaken significantly in 2020 and 2021. At the same time, the expansionary fiscal policy will help to stimulate the economy and accelerate the recovery, and over time this will lead to stronger finances again.

Key indicators forecast, September 2020
2019 2020 2021 2022 2023
GDP, calendar-adjusted, percentage change 1.2 -4.9 4.0 3.8 2.9
Employment, aged 15–74, percentage change 0.7 -2.1 0.3 2.4 1.7
Unemployment, as per cent of labour force aged 15–74 6.8 9.0 9.5 8.1 7.1
General government net lending, as per cent of GDP 0.3 -5.5 -3.5 -1.6 0.3
Structural net lending, general government sector, as per cent of GDP 0.3 -2.6 -1.0 -0.3 0.8
Note: GDP components refer to fixed prices
Sources: Statistics Sweden and own calculations

 

Key indicators forecast, September 2020

Reforms worth more than SEK 100 billion

The Government proposes extensive fiscal policy stimulus measures and reforms worth more than SEK 105 billion for 2021 and more than SEK 85 billion for 2022. Its fiscal policy response has two overall aims. The economic recovery will be supported by a powerful and green restart package. At the same time, a long-term approach will be used to tackle societal problems so that Sweden will be stronger after the crisis.

A powerful and green economic restart

A temporarily expansionary fiscal policy is needed to pull Sweden out of the recession as quickly as possible and get people into work again. The Government therefore proposes extensive green investments, extra resources to welfare and tax reductions on labour and enterprise. In addition, opportunities for employment transition will improve for those who need or want to transition. The measures will contribute to accelerating the climate transition, supporting the recovery and increasing employment throughout the country.

A stronger Sweden after the crisis

In addition to pandemic responses, new proposals are being presented for a long-term approach to societal challenges. Unemployment, climate change, growing welfare needs, the urban-rural gap, lack of integration, learning outcomes in schools and crime will be addressed through continued reform efforts.

Table of reforms

Amendments to the budget for 2020

In conjunction with the Budget Bill, the Government presented an additional proposal for amendments to the budget for 2020. The Government’s proposal includes SEK 5.5 billion to the local government sector for additional COVID-19-related costs, including enhanced crisis support, counselling and trauma support for staff working in health care and care of older people. Several government authorities and county administrative boards will receive additional funding to manage the impacts of the pandemic.

The additional amending budget also contains a proposal for SEK 0.7 billion to the Swedish Rural Development Programme.

In addition to the spring and autumn amending budgets, the Government has presented ten additional amending budgets.

Economic measures in 2020 in response to COVID-19

Next step – Riksdag processing of the draft budget

When the Government has presented its draft budget, the Riksdag’s processing begins. This is divided into two stages:

Stage 1: First, the Riksdag adopts the guidelines for economic policy and the economic framework of the central government budget. The framework decision, i.e. the decision on the limits for how large expenditure can be per expenditure area, guides the continued processing in the Riksdag, as the expenditure frameworks cannot be exceeded.

Stage 2: In the second stage, the Riksdag takes a position on allocating expenditure in each expenditure area, in other words how much money (appropriation) different activities will receive. Processing of the Budget Bill is complete when the Riksdag has taken a position on the proposals for all 27 expenditure areas. The Riksdag then finalises the central government budget.

Based on the results of the Riksdag’s processing, the Government decides on appropriation directions for all government agencies and appropriations.