Higher than expected capital tax revenues reinforces general government net lending

31 August 2018 | News

Tax revenues have been revised up in the Swedish National Financial Management Authority’s (ESV) new forecast, as a result of a stronger than expected outcome for 2017. Forecasted public expenditure has only changed marginally. The surplus in net lending has been revised up for both 2018 and 2019.

GDP growth remains high, but as of the second half of this year, the growth rate will slow and the high resource utilisation in the economy will start to fall. Our forecast of the macro economy is largely unaltered since our June forecast.

Compared to last year, total tax revenues will increase at a considerably slower rate both this year and the next. Revenues from tax on corporate profits and households' capital income, including dividend income, have been revised up compared to our June forecast. This is due to a stronger than expected outcome for 2017, which raises the level for the present year and the years ahead.

Expenditure increases greatly this year, primarily as a result of measures in the latest budget bills. However, substantially lower expenditure on migration restrains the overall rise in expenditure. The margin to the spending cap is considerable. Expenditure subject to the spending cap has been lowered marginally compared to our June forecast.

General government net lending weakens from 1.3 per cent of GDP last year to 0.9 per cent of GDP this year, and continues to decrease somewhat next year. Compared to our June forecast, net lending has been revised up by 0.4 percentage points both for 2018 and 2019.

From 2019, the surplus target will be lowered to one third of a per cent of GDP. The structural budget balance is the indicator which shall be used to ex ante monitor net lending against the new surplus target level. According to our forecast, the structural budget balance will be 0.5 per cent of GDP in 2019, and thus somewhat higher than the target level.