Swedish Economy Report

The Russian attack on Ukraine is a large-scale humanitarian disaster and is causing immense human suffering. Around 200,000 Ukrainian refugees are expected to come to Sweden this year, resulting in a substantial increase in government consumption expenditure.

Public finances are strong, however, and the main challenges in the short term concerning the refugees will be practical rather than financial. GDP growth will not be affected particularly by the situation that has arisen. Households have seen their purchasing power eroded by high inflation, but the phasing out of pandemic restrictions means that they will draw on their considerable savings to increase their spending, albeit slowly. The Swedish economy will move slightly above capacity towards the end of 2022. The high rate of inflation and rising resource utilisation in the economy will lead the Riksbank to end its zero-rate policy and to begin raising the repo rate in September this year.