By Emese Bartha


Sweden' National Debt Office expects a budget deficit for both this year and the next after three consecutive years of a budget surplus, and raised its nominal government-bond issuance targets for both years, it said in its borrowing review on Thursday.

"That entails an increase in the central government debt, from a low level," the NDO said. "Given the larger borrowing requirement, the Debt Office is increasing its bond issuance."

The NDO expects a budget deficit of 84 billion Swedish kronor ($8.11 billion) in 2024, having seen a deficit of SEK49 billion in October, it said. It also expects a budget deficit of SEK50 billion in 2025, compared with its previous forecast of a SEK60 billion deficit.

"Central government finances have been strong after the pandemic, but we now foresee some weakening, with dampened tax income and increased government spending," Debt Office Director General Karolina Ekholm said in a press release.

"A contributing factor to the greater borrowing need than in our previous forecast is that we now expect a capital contribution to the Riksbank," she said.

The NDO increased its government-bond issuance target to SEK73 billion from SEK60 billion for 2024, and to SEK80 billion from SEK60 billion for 2025, it said. However, it left its issuance target for inflation-linked bonds unchanged at SEK9 billion for 2024 and SEK9 billion for 2025.

As the borrowing requirement grows, the NDO is increasing the auction volume of nominal bonds to SEK3.5 billion starting in March from SEK3 billion currently, and then further to SEK4 billion as of August, the NDO said.

The NDO's GDP and employment forecasts are on the optimistic side compared to Nordea's view, which suggests that the borrowing plan might have to be revised higher later this year, says Nordea analyst Gustav Helgesson.

The NDO expects a GDP growth of 0.5% for 2024 and 2.3% for 2025.

Nordea also sees a risk that the NDO underestimates the budget deficit, especially for 2025, the analyst says.

"Thus, this could affect government borrowing needs in late 2024 and 2025, but less so in the near term," he says.


Write to Emese Bartha at emese.bartha@wsj.com


(END) Dow Jones Newswires

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