Swedish economy recovering despite considerable global uncertainty

Major uncertainty in the world 

Abrupt changes in the US administration’s trade and foreign policy significantly impacted the global economy in 2025. Strong growth in the US was driven partly by major AI investments, which are also expected to boost the economy in 2026. The economic recovery in the Euro area that began in 2025 is expected to continue this year. This is in spite of the uncertain geopolitical situation and higher US tariffs that are slowing exports. Uncertainty in the global economy is expected to remain high in 2026, particularly due to the war in the Middle East and the tariffs imposed by the US administration at the beginning of the year. 

Swedish economic recovery despite international unease

The Swedish economic recovery that began in early 2025 continued in the fourth quarter. Growth was driven primarily by increased household consumption and central government investment. 

In general, rising real wages, lower inflation and tax reductions are expected to boost household consumption and the housing market going forward. At the same time, fiscal policy is expected to help increase public consumption and investment. Overall, the economic recovery is expected to continue in 2026, although it will be somewhat subdued in the short term due to international uncertainty. The economy is expected to be close to balanced in 2027.

Brighter labour market prospects

The labour market is showing signs of recovery. Employment began to increase at the end of 2025, and labour market indicators show increased demand for labour in the short term. In 2026, labour market conditions are expected to continue to improve, which will result in lower unemployment. 

 “Despite global uncertainty, the Swedish economy is on a firm footing, with world-class state finances. The Government has carried out several initiatives to strengthen households and spur the economy such as reduced taxes on labour and savings. Additional initiatives will now take effect in the spring, such as temporarily reduced value added tax on food,” says Ms Svantesson.