Sweden upgrades economic forecast

STOCKHOLM

Sweden's government on Monday upgraded its economic outlook, citing signs of global recovery following the financial crisis.

Sweden's economic output is expected to shrink by 4.9 percent this year and grow by 2 percent in 2010, the Finance Ministry said.

In a previous forecast, the ministry had predicted a 5.2 percent contraction in 2009 and 0.6 percent growth next year.

It also changed its unemployment estimate for 2010, to 10.7 percent instead of 11.4 percent.

The ministry cited a stronger performance than expected in the global economy and lower uncertainty among companies and households.

"Sweden has landed on its feet after the financial crisis. But to stand steadily we need to continue on the expansive direction of our current economic policy," Finance Minister Anders Borg said in a statement.

In September the government proposed a series of stimulus measures, including spending on infrastructure projects, to help the economy recover. It said those measures would add 32 billion kronor ($4.7 billion) to the budget deficit in 2010, widening it to 3.8 percent, from 2.2 percent this year.

Nevertheless, the government said it could afford to cut income taxes by 10 billion kronor ($1.45 billion). The center-right coalition has slashed Sweden's famously high income taxes in several stages since it took power in 2006.

Sweden will hold parliamentary elections in September next year. Recent opinion polls show the government trailing the opposition bloc headed by the Social Democrats.