Swedish Economy Report

The recent upsurge in the prevalence of Covid-19 and the new omicron variant has created considerable uncertainty about where the Swedish economy is headed in the near term.

The restrictions introduced at the beginning of December to curb the spread of infection will probably be stepped up, and voluntary social distancing is increasing. This will put a damper on demand, especially for close-contact services, and so the recovery in the Swedish economy will stall temporarily in the first quarter of 2022. Once the current wave of infections subsides during the spring, the economy will begin to grow more quickly again, and the output gap will turn mildly positive in the second half of the year. The labour market will lag behind in the recovery, largely because many of the unemployed have been out of work for a long time or belong to other groups with weak labour market attachment.