Sweden’s Borg warns of slower growth

Swedish finance minister Anders Borg has warned that he may be forced to cut growth forecasts a day after the country’s central bank cut its repo rate.

The Swedish government put forward a GDP growth forecast for 2012 of 1.3% in its Budget delivered in the Autumn of 2011.

However, the new forecast may be as low as 0.5% growth for 2012.

“We will probably revise down growth,” Borg admitted in a briefing.

Sweden’s central bank, Sveriges Riksbank, yesterday cut its repo rate by 0.25% to 1.5%, citing slower growth in markets that are important for Swedish exports. Stefan Ingves, Riksbank governor, said the lower rate was likely to last into 2013.

However, predicting the rate going forward remains uncertain, the bank said in its repo statement: “There is considerable uncertainty about economic development abroad. The public-finance problems in the euro area in particular may become more serious and have more negative effects on the Swedish economy. In this situation, the repo-rate path may need to be lower. On the other hand, it is possible that confidence in the public finances of the euro countries will recover more quickly than expected. This would call for a higher repo-rate path.”

Commentators today in Swedish media urged savers to switch their focus to paying off mortgage debt in light of the lower rates they will receive on their deposits.





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