Swedish Economy Report

The Swedish economy will operate below capacity both this year and next. Sweden’s rate-sensitive households have been hit hard by high inflation and higher interest rates, as has residential constructions, which is now falling fast.

Together with a slowdown in exports, this means that GDP will decrease slightly in the coming quarters. Demand for labour is still strong, howev-er, and there are no signs yet of the labour market deteriorat-ing. The downturn in the economy is expected to be short-lived and mainly takes the form of lower productivity than normal in the business sector. It will have only a limited impact on the labour market, and unemployment will rise much less than in previous downturns. CPIF inflation will continue to fall and will be well below the Riksbank’s inflation target in the second half of 2024. The Riksbank will therefore commence a series of rate cuts in the second quarter of next year. Fiscal policy will also be reoriented to support the economic recovery. The central gov-ernment budget for 2024 is assumed to contain unfunded measures of SEK 45 billion, of which SEK 25 billion will target households. However, monetary policy will play the lead role in stabilising the economy in the coming years