Swedish economic recovery expected to gain momentum

“The Swedish economy is well equipped to deal with the consequences of the uncertain global situation. The Government has taken several measures to reduce pressure and support the recovery, including by cutting taxes on petrol and diesel and halving the cost of monthly travel cards for public transport,” says Ms Svantesson. 

Major global uncertainty remains

Conflict in the Middle East continues to affect the global economy. The war and the closure of the Strait of Hormuz have resulted in higher energy prices, higher inflation and increased interest rates globally. At the same time, extensive investment in AI, especially in the United States, has helped sustain world trade and keep stock markets buoyant. 

The recovery in the Eurozone is expected to be more prolonged than previously expected. Higher energy prices have caused a clear rise in inflation, and forward-looking indicators suggest that high price pressures and subdued growth will persist in the coming months.

Recovery expected gain momentum in second half of 2026

The Swedish economy is facing the challenging situation from a position of strength. The European Commission estimates that inflation in Sweden will be the lowest in the EU in 2026. Furthermore, Sweden also has limited dependence on fossil fuels compared to other countries. 

Although the Swedish economy is in recovery, the upward trend is expected to slow temporarily in the first half of 2026 due to global uncertainty. Nevertheless, household consumption continues to increase at a relatively good pace. GDP growth for 2026 is unchanged from the updated forecast presented in May 2026. 

The recovery is expected to gain momentum in the second half of 2026, driven by rising real wages, supportive fiscal policy and increased investment. The recovery of the labour market has slowed. The labour market situation is expected to improve from the second half of 2026 onwards through increased employment and a gradual decrease in unemployment. The economy is expected to reach cyclical balance in 2028.

Inflationary pressure in Sweden remains low despite higher energy prices, partly as a result of low core inflation and temporary tax cuts. Inflation is expected to be close to target in 2027.