Swedbank Economic Outlook: Optimism dawns in Sweden at last

The Swedish economy has bottomed out, but growth is not expected to pick up significantly until the second half of this year. Households are optimistic about their future economic situation, but nevertheless remain cautious when it comes to increasing their consumption.

“The household sector is rate-sensitive, and it is only this year that the Riksbank’s rate cuts will start to have more of an impact on household finances. Together with real wage growth and tax cuts, this will cause household consumption to grow significantly faster than normal starting this summer,” says Mattias Persson, Group Chief Economist, Swedbank.

A sluggish recovery for the Swedish labour market
The labour market has been weakening for more than two years. When the Swedish economy picks up during the second half of the year, the labour market will strengthen gradually.

“Most indicators suggest that the majority of the decline on the labour market has already taken place, and that the situation will stabilise going forward. Unemployment is expected to remain at about 8.4 per cent in 2025, and then it will start to drop,” says Mattias Persson.

More policy-rate cuts are coming, but the low point is near
In Sweden, inflation is now below the 2 per cent target, but is expected to rise and remain near the target during the next two years.

“As inflation has stabilised around the target, and with growth in the Swedish economy at a weaker level than normal, we expect the Riksbank to cut the policy rate in March to 2 per cent, which is our assessment of a long-term normal level. At the same time, it cannot be ruled out that the Riksbank may need to cut the policy rate even more,” says Mattias Persson.

Swedish housing prices get a boost
The Swedish housing market has started to recover, with a significant increase in home sales and rising prices. Housing prices will continue to rise as purchasing power is strengthened by lower mortgage rates and higher incomes, while mortgage rules are eased.

“The high supply of homes for sale will dampen price increases for a while longer, however. We expect housing prices to rise by 5 per cent this year and 7 per cent in 2026,” says Mattias Persson.

The Swedish economy will pick up
Domestic demand will boost the Swedish economy in the second half of 2025. Higher consumption and housing investments, together with public investments that are growing at a faster rate than normal, will lead to a rise in Swedish growth. Swedbank expects Swedish GDP to grow by 2 per cent this year and by 3 per cent in 2026.

“There is scope for optimism for the Swedish economy. The geopolitical situation is of course uncertain, but Sweden has the capacity to grow faster than normal,” 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. 

Contact:
Mattias Persson, Group Chief Economist, Swedbank, tel. +46 73 094 29 56   
Hannes Mård, Media Relations Manager, Swedbank, tel. +46 73 057 41 95