Impact of adjustments to the budget bill
The forecast is based on the budget approved by the Swedish parliament for 2019. It is in turn based on the budget bill for 2019 (the transitional budget), with a number of adjustments according to a reservation by the Moderates (M) and Christian Democrats (KD) (the Ministry of Finance’s report 2018/19: FiU1). ESV’s forecast is more uncertain than usual, especially concerning the years following 2019, as the information in both the transitional budget and the M/KD reservation is less detailed than in a normal budget bill.
The transitional budget does not include any new political initiatives, apart from a tax cut in 2019 for persons over 65 years of age. The budget has been based on the 2018 budget with certain adjustments. Previous proposals regarding increased expenditure have not materialised, which would result in a very weak expenditure trend and weak trend in public consumption 2019–2021. Nor have the tax changes previously discussed for 2020 been realised.
Adjustments according to the M/KD reservation weaken the budget balance for 2019 by SEK 17 billion compared to the transitional budget. This is due to tax cuts of SEK 14 billion and (net) increases in expenses of SEK 4 billion. In total, nine expenditure areas are seeing increases (SEK 15 billion) and eleven are experiencing decreases (SEK 11 billion), while seven areas remain unchanged. Around 100 of the budget’s almost 500 expenditure appropriations have been adjusted in relation to the transitional budget. For 2020 and 2021, the M/KD reservation contains adjustments on the income side (tax cuts) in parity with 2019. However, expenditure is significantly higher than in 2019. In total, this weakens the budget balance by SEK 36 billion and SEK 48 billion, respectively, compared to the transitional budget.
The biggest effect of the M/KD adjustments on macro development is that consumption growth is higher than with the transitional budget. This applies both to household and public sector consumption. GDP growth thus becomes higher in the short term. In the long term, when the economy’s potential is controlled by labour supply and productivity, the GDP level is almost unaffected by the budget measures. The central government sector’s net lending is weakened by the M/KD adjustments by 0.4–0.9 per cent of GDP for 2019–2021.
The coming government will make changes to the approved budget for the current year in the spring amending budget 2019 and for the following year in future spring and budget bills. This is laid out in the agreement presented in January 2019 by the Social Democrats, the Centre Party, the Liberals and the Green Party.