Fiscal outlook
Sweden recorded a 1.6% deficit and a debt-to-GDP ratio of 34% in 2024.
Deficit measures the extent of borrowing in a given yr. Debt-to-GDP compares the full public debt to the scale of the financial system. Each are at present used to find out how a lot borrowing a member state is allowed to undertake. Nonetheless, neither measure in itself determines a authorities’s capability to maintain larger ranges of public funding. Fiscal sustainability depends upon development, the multiplier results of funding, rates of interest, inflation, the construction of the financial system and exterior dangers reminiscent of local weather change. NEF advocates shifting away from strict numerical debt targets.
Rising local weather prices
Excessive climate occasions have gotten extra frequent and are anticipated to accentuate within the coming a long time. Examples embrace the devastating Hurricane Gudrun in 2005, the unprecedented drought and wildfires in 2018, and the excessive precipitation close to Gävle in 2021. Summers have gotten hotter, too. The 2025 heatwave, which lasted a number of weeks, contributed to numerous forest fires, overheating and overcrowding in hospitals, and the unfold of poisonous algal blooms. The results of the heatwave on reindeer additionally threaten the livelihoods of indigenous Sámi communities. The nation is additional put underneath pressure by coastal erosion, elevated flooding, and storm surges: 131 out of 290 municipalities are situated in coastal and river areas and over 82% of the inhabitants resides in coastal areas. But, whereas coastal municipalities alone require SEK1.33bn (€124m) yearly to adapt to local weather change, the 2024 funds for local weather adaptation was solely round SEK200m (€18.7m).
What NEF’s modelling reveals
Organisation for Financial Co-operation and Improvement (OECD) projections present Sweden’s GDP declining by 9% by 2050 and 12% by 2070 underneath present insurance policies. Our modelling reveals the next:
- Below present insurance policies (BAU – enterprise as normal), Sweden’s debt is projected to be 31 pps larger than the climate-agnostic baseline in 2050 and 107 pps larger in 2070.
- With early EU mitigation and adequate adaptation spending, debt is 12 pps larger in 2050 and 5 pps larger in 2070.
- Delayed EU investments and inadequate adaptation ends in larger debt ranges of 30 pps in 2050 and 42 pps in 2070.
- EU early motion mixed with world cooperation ends in 5 pps decrease debt ranges than the climate-agnostic baseline in 2050 and 30 pps decrease ranges in 2070.
- Progressive taxation, reminiscent of a wealth tax, mixed with EU early motion would cut back debt by 15 pps in 2050 and by 52 pps in 2070 in comparison with the climate-agnostic baseline.
Picture: iStock
