Swedbank Economic Outlook: A delayed recovery

Restrictive monetary policy has held back growth in Sweden, but the economy will pick up speed next year and gain strength in 2026. The US election outcome has led to increased global economic uncertainty, and is expected to have a negative impact, according to Swedbank Economic Outlook.

Global economic development is highly divergent; the US economy continues to grow, while China and Europe are still experiencing headwinds. The US election outcome has generated greater uncertainty, and the growth outlook has weakened as a result of higher tariffs. In Sweden, economic development is weak, and the labour market continues to deteriorate.

“In Sweden, consumption remains weak, and so far there is no turnaround in sight. However, we believe that households will start consuming more next year as incomes continue to rise faster than prices, while interest rates continue to fall. At the same time, savings rates will remain on a high level,” says Mattias Persson, Group Chief Economist, Swedbank. 

Sweden’s labour market is weak, but will improve next year 
The labour market has weakened during the past two years, and unemployment has risen. 

”We estimate that Swedish unemployment will peak at 8.7 per cent and that the labour market will begin a cautious turnaround during the first half of 2025, with lower unemployment. A more substantial improvement on the labour market is dependent on additional rate cuts from the Riksbank,” says Mattias Persson. 

Additional rate cuts will be made
In Sweden, inflation is just under the target and will remain near the target in the coming years. 

“Monetary policy remains restrictive in Sweden, and we expect the Riksbank to make an additional policy rate cut at its December meeting, by 0.25 percentage points. In 2025, the cuts will continue until the rate reaches 1.75 per cent. In the near term, it will be essential for the Riksbank to take a monetary policy approach that will support the Swedish economic recovery,” says Mattias Persson. 

A pick-up in the Swedish housing market 
Sweden’s housing market will benefit as interest rates fall and household purchasing power gains strength. 

“Even if mortgage rates fall during the coming period, we expect them to remain on a higher level than they were before rates started to increase in 2022. At the same time, the easing of macroprudential measures will give the housing market some support for 2026. We expect housing prices to rise by about 5 per cent in 2025 and 6-7 per cent in 2026,” says Mattias Persson.

The Swedish economy will gear up, but at a slower pace
Swedish economic performance will be weak in 2024, and the economy will grow by a modest 0.6 per cent, according to Swedbank’s new forecast. Weak global economic development and greater barriers to trade as a result of the US election outcome are additional reasons for the weakened outlook. Swedbank expects Swedish GDP to rise by about 2 per cent in 2025 and by just under 3 per cent in 2026. 

“The Swedish economy will begin its recovery in 2025, driven mainly by domestic factors despite continued weakness in the surrounding environment. The US election outcome has led to greater uncertainty, and we have revised our Swedish growth outlook down somewhat for 2026,” says Mattias Persson.

The report is included as an attachment to this press release and is also available on Swedbank’s website at www.swedbank.com/seo.