Sweden sets out budget bill with tax cuts and higher defence spending
Right-wing government outlines new spending of 60 bln SEK
Autumn budget bill focused on boosting growth
Falling inflation leaves room for more spending
Government to cut taxes, hike spending to fight gang crime
Adds detail and background in paragraphs 7-11
By Niklas Pollard and Anna Ringstrom
STOCKHOLM, Sept 19 (Reuters) -Sweden's right-wing government said on Thursday it planned to raise spending in 2025 by 60 billion crowns ($5.90 billion), partly to boost defence and fight crime, but would also cut taxes to help lift growth.
The Swedish economy has been in the doldrums over the past couple of years as soaring inflation and the interest hikes needed to curb it dampened consumer spending and activity in the construction sector.
That same inflation also led Prime Minister Ulf Kristersson's government to keep a tight lid on spending to avoid further stoking price rises that peaked above 10%.
With inflation now safely below the central bank's target of 2% over the past three months, the coalition government had already outlined plans to kick-start economic growth by cutting income taxes and taxes on pensions.
"The task ahead is to ensure that the high inflation doesn't come back and at the same time carry out reforms and investments that will be make Sweden richer and safer for coming generations," Finance Minister Elisabeth Svantesson said.
The finance ministry maintained its economic growth forecast for 2025 of 2.5%, in line with an August prediction.
The Nordic country's government debt is among the lowest in the European Union at about 30% of gross domestic product and some economists argue it should ramp up spending even more to energise the economy and bolster the welfare sector.
Among the headline measures in the budget bill, the government will cut income taxes to the tune of 18 billion crowns while raising spending on the justice system to help tackle the country's deep-set gang crime problems.
Even when inflation was running hot, Sweden ramped up military spending, especially in the wake of Russia's invasion of Ukraine, with NATO's newest member set to spend 2.2% of GDP on defence this year, above the bloc's 2% target.
The government said earlier this week it would hike defence spending by 10% to 138 billion crowns next year, equal to 2.4% of GDP, with increases of more than 170 billion over the coming five years meaning Sweden would hit 2.6% of GDP from 2028.
The budget bill also allotted just over 23 billion crowns for military support for Ukraine next year, funds the government did not include in its 60 billion-crown estimate of new spending.
($1 = 10.1726 Swedish crowns)
Reporting by Niklas Pollard and Anna Ringstrom; additional reporting by Johan Ahlander; Editing by Terje Solsvik and Sonali Paul
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