2026-03-25
The Recovery Continues Despite War in the Middle East
Growth in the Swedish economy slows in the first quarter of this year as consumption increases more slowly. However, as domestic demand gathers pace, the downturn gradually fades towards the end of 2026. The war in the Middle East has a dampening effect on the economy, primarily through higher inflation.
The recovery in the labour market is taking longer, and it is not until the end of 2027 before unemployment has fallen to a roughly normal level.
This year and next, CPIF inflation will remain somewhat below the inflation target of 2 per cent. However, higher oil prices are expected to raise inflation by 0.6 percentage points in 2026 and 0.2 percentage points in 2027. The Riksbank will raise the policy rate towards the end of 2026.
The forecast is based on the assumption that the macroeconomic effects of the war in the Middle East will be limited and will gradually begin to subside after the summer. If this does not prove to be the case, the negative effects of the war could be considerably more extensive, as illustrated in an alternative scenario.
Current fiscal policy implies that the structural public balance will be significantly below the surplus target this year. The low initial level of structural savings limits the fiscal space for the period 2027–2030, which in total amounts to around SEK 60 billion.
