Swedish economy in recession, but brighter prospects ahead

“We see that inflation has continued to fall and is now slightly below the target. We are in the midst of a recession, but we see brighter prospects now that the fight against inflation has been won,” says Ms Svantesson.

Swedish growth has stagnated over the past two years and GDP declined in the second quarter of 2024, but the recovery is expected to begin towards the end of 2024. The economic situation will improve in 2025 and 2026, when GDP growth is expected to increase further, driven by household consumption and an increased rate of investment, particularly in housing. 

“We are at a tipping point now that inflation has been suppressed, interest rates are starting to fall and real wages are rising. This will ease the burden for both households and businesses. As a result, household consumption is expected to increase at a faster rate. We see that the housing market is also showing some signs of recovery, but it will take time before it takes off,” says Ms Svantesson.

Developments in the Swedish labour market have been subdued. Unemployment has risen over the past year and demand for labour is expected to remain low throughout 2024. A recovery in the labour market is expected to begin around the turn of the year. 

The overall economic outlook in the previous forecast of June 2024 largely holds up. The Swedish economy is in recession, but growth is expected to increase going forward. 

The forecast is uncertain, as there are several factors that can affect developments, including turbulence in the financial markets and economic and geopolitical developments abroad.

“The Swedish economy is facing a recovery. The focus now is on measures to build Sweden stronger and more prosperous with investments for the future. The reforms in the budget will amount to around SEK 60 billion,” says Ms Svantesson.