Svantesson: Prolonged recession impending

- Growth this year has been revised slightly upwards, due in part to companies’ continued willingness to invest. But it is clear that a significantly worse economic situation is coming, which will be difficult for many households. The recession is expected to be more prolonged than forecast in the Budget Bill, and it does not appear that it will hit bottom until 2024. Although many households are already facing severe financial difficulties due to the economic situation, it takes time for the increased costs to have a greater impact on consumption, says Minister for Finance Elisabeth Svantesson

High inflation and rapidly rising interest rates are expected to slow economic activity next year. Sweden’s economy is also greatly influenced by demand in the rest of the world, which is expected to grow weakly. 

Gross domestic product is expected to decrease by 0.7 per cent in 2023, which is a downward adjustment from the previous forecast. Inflation is forecast to remain high for the rest of this year and early 2023 before decreasing over the course of the year. Inflation measured by consumer price index with fixed interest is expected to increase by an average of 6 per cent in 2023.

Due to the delayed economic downturn, the outlook for 2024 is significantly worse than previously forecast. GDP growth in 2024 has been adjusted downwards to 1 per cent. Unemployment is expected to increase in both 2023 and 2024 before decreasing as demand rises.

The forecast is subject to a great deal of uncertainty, particularly in connection with the energy situation in Europe, Russia’s war in Ukraine and continued high inflation. 

- In the current situation, it is important that financial policy be carefully considered. The worst-case scenario for households and businesses already facing financial difficulty would be a further increase in inflation. The Government’s budget for next year has undergone cuts aimed at combating inflation while providing room to act in the event that the economic downturn is worse than expected, says Minister for Finance Elisabeth Svantesson  

Sweden’s public finances are expected to be stronger this year due to continued strong tax revenues.

The expected downturn will burden public finances in 2023 and 2024, which will also weaken net lending over the next two years. However, a balance in lending is expected during that time.

The level of public indebtedness as a percentage of GDP is expected to remain low and quickly decrease over the forecast period. Sweden is one of the countries with the lowest national debt in Europe.