STOCKHOLM (Reuters) - Sweden's center-left government said strong finances gave it room to boost spending by around 0.6 percent of GDP in 2017 on schools and welfare services struggling to cope with last year's record numbers of asylum seekers.
Sweden took in 163,000 people in 2015 and while a U-turn on decades of generous asylum policies is expected to cut that number to around 35,000 this year many public services have yet to catch up.
Strong growth has boosted tax revenues and Finance Minister Magdalena Andersson said the minority coalition had room to spend on training more teachers and police, building new homes and ensuring recent immigrants find a place in the workforce.
"The Swedish economy is very strong," Andersson said.
"We have the highest growth in our region, unemployment is falling and the large deficit we inherited when we took power has been basically wiped out."
Andersson stuck to a forecast of growth of 3.5 percent this year.
The government said it would dole out 10 billion Swedish crowns ($1.17 billion) in the budget to local authorities to cope with asylum seekers.
Other measures include an increase in the Migration Agency's budget with more money going to courts as well as investment in scientific research, adult education and measures to fight climate change.
New spending totaled 24 billion crowns. Most of the measures were already known.
With Andersson forecasting public finances back in the black in 2018, many analysts have called on the government to open the spending taps and take advantage of record low borrowing costs to boost long term growth.
A housing shortage has pushed up prices and led to worries of a crash. Sweden's schools have slipped down in international rankings and their test scores are now below the average for advanced nations.
Productivity growth is low and many believe the labor market needs to be reformed to give those with lower qualifications - many of them immigrants - a chance to get a job.
"The Social Democrats .. do not seem to be able to come up with a coherent diagnosis with what is wrong with society and a big project to put it right," said Nick Aylott, political science professor at Sodertorn University. "They are just administering."
($1 = 8.5697 Swedish crowns)
(Reporting by Stockholm Newsroom; Writing by Simon Johnson; Editing by Alistair Scrutton)