Sweden reversed decades of generous immigration policies after 163,000 people sought asylum last year

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By Johan Sennero and Daniel Dickson

HARPSUND, Sweden, Aug 24 (Reuters) - Sweden's crackdown on immigration will save up to 100 billion crowns ($12 billion) in the next four years, the government said on Wednesday, promising in the run-up to elections in 2018 to redirect money to welfare, schools and jobs.

Sweden reversed decades of generous immigration policies after 163,000 people sought asylum last year. It imposed border controls, temporary residence permits and tougher rules for family reunion, reinforced by EU controls.

"We see significantly lower costs for migration and integration," Finance Minister Magdalena Andersson said on Wednesday as she gave new economic forecasts.

"Between 2017 and 2020 we expect costs to fall by 100 billion crowns compared to our earlier forecast."

In July, the Migration Agency cut its forecast for asylum applications, expecting up to 50,000 from from a previous estimate of up to 100,000.

Andersson said savings on immigration and reduced costs for sickness benefits would give the government room to boost spending by 24 billion crowns in the budget, to be presented on Sept. 20. The government has already earmarked 10 billion of this for local authorities.

"The government has clear priorities: jobs, schools and the environment," Andersson said.

Whether under centre-right or centre-left governments, Sweden has long had among the healthiest public finances in Europe, with public debt at 43 percent of GDP, compared with around 91 percent in the euro zone, according to Eurostat.

Some analysts say low interest rates and strong finances give the government an opportunity to tackle high unemployment, a housing shortage and sluggish productivity growth.

Despite the extra spending, Andersson said public finances would move from a small deficit this year to a surplus of 1.4 percent of GDP by 2020.

"It is important that we have tight fiscal policy during good times," she said. "There are also many who think that in the current situation we should borrow in order to make big investments, but I do not think that is responsible policy."

Growth will continue to outpace the average in Europe, with output expected to expand 3.5 percent this year against a forecast in April of 3.8 percent. The government revised up its growth forecast for 2017 slightly to 2.3 percent.

The budget will also include an extra 100 million crowns for measures in 2017 and 2018 to slow climate change and around 500 million over the next four years to fund 3,600 extra teacher-training places.

($1 = 8.4019 Swedish crowns)

(Reporting by Daniel Dickson and Johan Sennero; writing by Simon Johnson; Editing by Alistair Scrutton/Ruth Pitchford)

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