Swedish economy heading for 'tough winter', new finance minister says

By Johan Ahlander and Anna Ringstrom

STOCKHOLM (Reuters) -The Swedish economy is heading into a recession next year, driven by rampant inflation and the war in Ukraine, the country's new finance minister said on Monday.

The economy is now expected to contract by 0.4% in 2023, and there is significant risk that the outcome could be even weaker, Finance Minister Elisabeth Svantesson said in presenting her first economic forecast since the September election, in which a right-wing bloc secured a slim majority.

The Nordic country's previous government had in August forecast growth of 0.4% in 2023.

"Sweden's economic outlook is gloomy and we're heading for a tough winter," Svantesson told a news conference, adding that there was a high risk developments will be even weaker than the main scenario.

The finance ministry also raised its outlook for inflation, forecasting consumer price rises at fixed rates of 7.9% this year and 5.2% next year, up from the August projection by the previous government of 7.3% and 3.9% respectively.

Svantesson pledged to stick to Sweden's fiscal policy framework under which public finances are run at a 0.3% of GDP surplus over an economic cycle. It is widely credited with having a significant impact on Sweden's strong public finances.

"For us and me, it is important that fiscal policy in this situation is well balanced, that fiscal policy does not fuel inflation. And we will stick to the fiscal policy framework, and thereby ensure that we have room for manoeuvre if next year becomes even more difficult," she said.

(Reporting by Anna Ringstrom, Johan Ahlander and Niklas Pollard in Stockholm, and Terje Solsvik in Oslo, editing by Gwladys Fouche, Stine Jacobsen and Mark Heinrich)