Swedbank Economic Outlook: Recovery in sight
The Swedish economy will gradually enter a recovery phase this summer. Inflation will continue to fall and household real income will rise, although the labour market will weaken this year. The Riksbank will start cutting the policy rate in May, and fiscal policy will be more expansionary in 2025, according to Swedbank Economic Outlook.
“The outlook for households is starting to improve. After two years of falling income, real disposable income will increase this year and will go up even more next year. Consumption will remain subdued for a while as the labour market weakens during the year, but it will begin to rise after the summer, and then take a leap in 2025 with an increase of 3.4 per cent,” says Mattias Persson, Group Chief Economist, Swedbank.
Inflation is falling rapidly – which will support rate cuts
In Sweden, the inflation trend remained favourable in early 2024. CPIF inflation is expected to fall below the Riksbank’s target of two per cent by the summer, and to remain low in 2025.
“We expect the policy rate to be cut by 25 basis points in May, to 3.75 per cent, followed by three further cuts this year. The Riksbank will continue to cut the policy rate in 2025, down to 2 per cent. Monetary policy will become less stringent, providing a much-needed injection for the Swedish economy,” says Mattias Persson.
Housing prices have bottomed out, with moderate price increases in sight
Housing prices have largely remained flat in the past 12 months and are about 10 per cent below the peak noted in spring 2022. They have now stabilised, with price increases around the corner.
“The Riksbank’s change of direction will give the housing market a boost. In combination with better household purchasing power, this indicates an increase in demand for housing and a moderate price increase of 2–3 per cent this year and around 5 per cent next year,” says Mattias Persson.
A comeback for the Swedish economy
The Swedish government’s recently presented spring amendment budget was the first step towards a more expansionary fiscal policy, and next year the policy will be even more expansionary, with SEK 50 billion in unfunded fiscal measures. The Swedish economy is gradually gearing up, and next year the country’s growth will outpace that of most other European countries.
“A recovery is in sight for the Swedish economy. When the economic policy shifts, with monetary policy becoming less stringent and fiscal policy becoming expansionary, growth in Sweden will truly pick up speed – making Sweden one of Europe’s fastest-growing economies. This also indicates that the Swedish krona will gain strength,” says Mattias Persson.
For the full report, see attachment or visit: www.swedbank.com/seo.
Contact:
Mattias Persson, Group Chief Economist, Swedbank, tel. +46 73 094 29 56
Charlotte Nilsson, Press Communicator, Swedbank, tel. +46 76 534 66 12
