Sweden to increase military spending to 3.5% of GDP by 2030 after Ukraine conflict

The Swedish government has announced an additional 11.5bn Swedish crowns (approximately $1.18bn) in spending for the 2025 budget. This is in response to economic challenges stemming from a trade war initiated by US President Donald Trump, which has adversely affected Sweden's growth prospects.

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The new funds are allocated to various sectors, including tax incentives for home renovations, increased funding for schools, road maintenance, and prisons. Additionally, there is a significant boost in defense spending, aiming to raise the military budget to 3.5% of GDP by 2030, in light of Russia’s invasion of Ukraine.

To accommodate this increased spending, Sweden plans to relax its stringent budget rules. The government will shift from targeting a 0.33% GDP surplus to aiming for a balanced budget, providing an extra 25 billion crowns ($2.38bn) annually for vital investments in infrastructure and defense.

Sweden is moving ahead with plans to develop a new fleet of nuclear reactors, an investment expected to cost around 300bn crowns. The country is also boosting spending on critical infrastructure to accelerate the transition away from fossil fuels in both transport and industry.

Despite these changes, Sweden maintains strong public finances, with government debt at around 30% of GDP, well below the EU average.

While many European nations grapple with difficult budget decisions amid ongoing geopolitical tensions, Sweden’s public finances remain strong and well-positioned to support these initiatives.