Swedish Economy Report

Expansionary economic policy during the pandemic, extensive disruption of global value chains and Russia’s war on Ukraine have created a perfect storm, with inflation soaring in many parts of the world.

Rampant inflation, dwindling asset prices and expectations of further increases in interest rates have left Swedish consumers deeply pessimistic about the future. Sentiment in the business sector is very different, with continued widespread optimism as a result of healthy order books and relatively good profitability. However, the erosion of consumers’ purchasing power means that demand will weaken, the economy will drop back below capacity, and unemployment will remain relatively high next year. When deciding how much to tighten monetary policy, the Riksbank faces a difficult balancing act between the aim of reining in inflation, and avoiding an overly deep economic downturn.