2025-06-17
Swedish Economy June 2025
Swedish GDP declined in the first quarter of this year. The trade policy of the US administration is having a dampening effect on the global economy, both through higher tariffs and the uncertainty the policy creates. This is contributing to continued weak growth in the export market for Swedish firms this year and next. Nevertheless, the economy is expected to begin recovering in the second half of the year.
For an extended period, households have been reluctant to increase their consumption, despite rising real wages and falling interest rates, but there are now signs that a turnaround is underway. Households are starting from a position of high savings, and with real disposable incomes rising rapidly this year, household consumption is expected to be the strongest driver of the recovery. Next year, inflation will fall below 2 per cent. The economic downturn and subdued inflation outlook mean that the Riksbank will lower the policy rate twice this year to 1.75 per cent, providing additional stimulus to the recovery. The turnaround in the labour market will take somewhat longer. Many firms have ample spare capacity and can therefore increase output without hiring new staff. Employment will therefore not begin to rise significantly until next year, and unemployment will remain markedly elevated at the end of the year. Fiscal space for the period 2026–2029 is estimated at around SEK 110 billion, of which SEK 35 billion is assumed to be used in the Budget Bill for 2026.
