The Swedish government announced plans to temporarily reduce value-added tax (VAT) on food to 6% as part of its upcoming election-year budget bill. Prime Minister Ulf Kristersson stated on Thursday that the measure is intended to support households and the wider economy amid weak growth and ongoing pressure from international tariffs.
Kristersson explained that uncertainty over U.S. President Donald Trump's tariffs, alongside the lingering effects of post-pandemic inflation, has contributed to economic stagnation. "This has created a ... drawn-out downturn in the economy which, even if it is not as dramatic as we had during the financial crisis of 2008-2009, is in fact worse overall," he said. He added that the budget will focus on households' purchasing power and finances.
The right-wing coalition government confirmed last week that the 2026 budget bill will include 80 billion Swedish crowns (US$8.41 billion) of unfunded measures, making it the largest expansion since the pandemic. The VAT reduction on food will apply from April 2026 through December 2027. Deputy Prime Minister Ebba Busch stated that the measure will save the average family around 6,500 Swedish crowns (US$683) per year, while a pensioner couple will save about 4,400 crowns (US$462).
To ensure these savings reach consumers, the government will establish a "food commission" to monitor price developments. "We are going to be watching the big food retailers," Busch said. Sweden's food retail sector is concentrated among a few supermarket chains, raising past concerns over limited competition. Earlier this year, Finance Minister Elisabeth Svantesson held discussions with supermarket executives regarding rising food costs.
The government has already announced a housing allowance increase for low-income families, at a budgetary cost of 655 million crowns (US$68.8 million). Analysts expect the budget to also include income and corporate tax reductions, alongside measures to meet NATO defense commitments and transition away from fossil fuel reliance.
Government debt is projected to increase, but will remain among the lowest in the European Union. Current debt stands at approximately 32% of gross domestic product (GDP), compared with the EU average of 90%. Sweden forecasts GDP growth of 0.9% in 2025 and 3.0% in 2026.
The 2026 budget bill will be submitted to parliament on September 22.
Source: Reuters
