Fragile recovery this year

Sweden is experiencing an economic downturn where high inflation and uncertainty about future economic developments are holding back both consumption and investments. This uncertainty furthermore means there is a risk that the weak economic trend will continue longer than forecasted.

Households have high savings initially, and real wages are increasing this year. Once inflation declines, it will help households to increase consumption more quickly, which will be an important driver for economic recovery in the second half of this year.

The economic recovery will continue next year, but the recession will persist, and unemployment will remain significantly elevated even at the end of 2026. CPIF inflation will ease later this year and be a few tenths lower than the inflation target next year. Therefore, the Riksbank is not expected to change the policy rate this year or next year.

The total fiscal space for 2026–2029 is estimated to be around 170 billion SEK, which will be gradually utilized over the next four years.

The forecast is based on the assumption that the tariffs already imposed by the US will remain in place, and that there will be an average 10 percent increase in tariffs on all other imported products. Overall, the consequences of the tariffs themselves are expected to be limited both on inflation and growth in Sweden and the EU, while the effects for the US are expected to be greater. The defense investments announced in many European countries are also not expected to have a significant impact on economic development this year or next year, partly because they take time to implement and partly because of a high import content.