Swedbank Economic Outlook: Tariffs and uncertainty will slow the Swedish economy down

The introduction of significantly higher tariffs than expected, combined with the US administration’s unpredictable economic policy, has led to increased volatility in the financial markets and is generating a very high level of uncertainty. In addition, the status of US assets as a safe haven in turbulent markets is being called into question.  

“Sweden, with its dependence on exports, will naturally be impacted by these circumstances. Swedish goods exports will be negatively affected by higher tariffs and lower global growth. The high level of uncertainty will cause firms to postpone investments,” says Mattias Persson, Group Chief Economist, Swedbank. 

Swedish households have become more cautious
Swedish households have become much more pessimistic in terms of their own financial situation and the Swedish economy in general. Households are expected to remain cautious even though real wages have begun to recover after price increases have undermined purchasing power in recent years.  

“The high level of uncertainty, weak labour market and rapid changes on the financial markets are causing households to hold back on their spending once again. Consumption is moderating and household savings are reaching record highs in uncertain times. The trend for housing prices will be somewhat weaker than we previously expected. After a weak start to the year, we expect housing prices to remain unchanged overall this year, with a 5 per cent increase in 2026,” says Mattias Persson.  

A weaker Swedish labour market 
In Sweden, unemployment is expected to get stuck at high levels during 2025, and employment is expected to decrease somewhat in the next quarter as companies adjust to changed global conditions. The high uncertainty will cause some firms to postpone recruiting. Only a few industries will be directly affected by the tariffs, however, and for the most part a delayed recovery for the labour market is foreseen. 
 
“Employment is expected to continue to grow in the defence industry and public sector, but greater caution on the part of households and companies will mean that the labour market recovery is delayed until next year for most other sectors. Unemployment will remain high in the next few years,” says Mattias Persson.  

Swedish economic policies will become more expansive
As inflationary pressure eases going forward, the Riksbank will change course to focus on supporting the Swedish economy. The Riksbank is expected to cut the policy rate by 0.25 percentage points in both June and September. At the same time, fiscal policy is anticipated to provide additional support to the economy this year and next year. Including new investments in defence, Swedbank forecasts reforms of SEK 60 billion next year; the majority of these measures will be aimed at households.   
 
“Despite the tariffs, inflationary pressure will be low in Sweden, as the krona has gained strength and global commodity prices have decreased. To support the economy, the Riksbank needs to cut the policy rate, which will reach 1.75 per cent this year. Fiscal policy will also provide support for the Swedish economy, and we expect measures such as income tax cuts and higher child benefit next year,” says Mattias Persson. 

The Swedish economy stands strong in uncertain times
Although uncertainty in the surrounding environment is high and the Swedish recovery will be slower than previously anticipated, Sweden’s GDP is expected to grow by 1.5 per cent this year and 2.5 per cent in 2026. At the same time, the euro area economy is expected to grow by just under 1 per cent both this year and next.  

“There’s an underlying strength in the Swedish economy, and despite all the uncertainty, it appears to be performing relatively well. Sweden’s public debt as a share of GDP is low, providing scope for investment in defence as well as targeted support if economic conditions should weaken,” 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, e-mail mattias.persson@swedbank.se 
Love Liman Jacobsson, Press Officer, Swedbank, tel. +46 72 233 92 32, e-mail love.liman.jacobsson@swedbank.se