Recession lingers, but economic recovery in sight

Inflation has been under the target since June 2024, and it is expected to be around the target in 2025. Overall, price development has normalisedand companies’ price expectations are now at average levels.

Recovery is expected to begin next year as household consumption increases. This is partly due to lower interest expenditure and rising real earnings. The housing market is also showing some signs of recovery, although it is expected to take time before investments in housing construction take off.

GDP growth is expected to increase further in 2026, driven by a rising rate of investment – particularly in housing.

Demand for labour has been subdued in 2024 and unemployment has risen. However, certain labour market indicators have improved somewhat and a gradual recovery in the labour market is expected in 2025. The unemployment rate is expected to increase to 8.4 per cent in 2025.

Economic activity in the United States has remained strong in 2024, with household demand as a key driving force. Forward-looking indicators also suggest that growth in the US will remain fairly strong. At the same time, the economic trend in the euro area has remained subdued and indicators point to weak development in the near future. However, the growth in the euro area is expected to increase and overall growth in Sweden’s most important export countries is forecast to rise in 2025 and 2026.

“Sweden remains in recession, but Sweden is financially strong and our potential for recovery in 2025 and 2026 is fundamentally good. However, developments are uncertain, and both geopolitical and geoeconomic risks have increased in recent months. Swedish exports could increase at a slower pace than expected if demand from Sweden’s most important trade partners is lower than anticipated. An escalation of the conflict in the Middle East or the war in Ukraine could negatively affect economic developments,” says Minister for Finance Elisabeth Svantesson.

The overall picture shows lingering recession, but economic recovery in sight.