Swedbank Economic Outlook: Growth will pick up, but uncertainty will remain

Additional policy rate cuts by the Riksbank and supportive fiscal policy will cause the Swedish economy to gain momentum next year despite the turbulent global environment. Higher tariffs and the uncertainty generated by US politics will dampen global trade, according to Swedbank Economic Outlook.

Households will drive the Swedish economic recovery
Sentiment in the household sector is weak at the moment. Swedish households are holding back on their spending, with a high rate of savings. Household purchasing power will gain further strength in the coming years, however, and rising consumption is expected to drive higher Swedish growth starting in 2026.

“Swedish households have strengthened their balance sheets thanks to a high rate of savings. Rising incomes, lower interest rates and supportive fiscal policy will further strengthen the financial situation for households, paving the way for increased consumption,” says Mattias Persson, Group Chief Economist, Swedbank.

A stronger Swedish labour market next year
Sweden’s labour market is being weighed down by the prolonged economic downturn, and it is expected to remain weak during the rest of this year. The turnaround on the Swedish labour market will take place later.

“The labour market is weak, and it will recover as economic growth picks up. Rising employment will contribute to a decline in unemployment, which we expect to fall to 7.7 per cent by the end of 2027,” says Mattias Persson.

A delayed recovery for the Swedish housing market
The Swedish housing market has stalled, and weak performance is expected during the rest of the year. The number of listings is high, sales processes are long, and the level of bidding activity is low. When mortgage regulations are eased next year, the housing market is expected to gain momentum with more completed transactions and higher prices, but the recovery will be delayed.

“Lower mortgage rates, stronger purchasing power and a recovering labour market will support the Swedish housing market. Altogether, housing prices are expected to rise by 35 per cent annually in 2026 and in 2027, in line with income growth,” says Mattias Persson.

The Riksbank will make more cuts in the near term 
In Sweden, inflation was unexpectedly high during the summer due to temporary factors, but it is expected to fall towards the inflation target, in part because the Swedish krona is gaining strength.

“With inflation nearing the target, the Riksbank will be able to focus on supporting the Swedish economy. The Riksbank will cut the policy rate twice more this year, down to 1.50 per cent. The cuts will be important to get the economy going. If growth picks up speed, the Riksbank could hike the rate in 2027,” says Mattias Persson.

Swedish fiscal policy will provide a growth impulse
Sweden’s military rearmament and defence-related investments, financed through increased government borrowing, will support economic growth. Swedbank expects a government budget including SEK 75 billion in unfunded measures in 2026, with more than half of the amount consisting of increased household transfers and tax cuts.

“This fiscal policy will provide much-needed support to get Swedish growth going. At the same time, Swedish state finances will remain strong. This could be important for supporting the Swedish economy going forward if the global economic situation weakens further,” says Mattias Persson.

The Swedish economy will pick up speed  
When household finances and confidence gain strength, consumption will get a boost. Exports and corporate investments will, however, be subdued as a result of weak global manufacturing conditions and significant increases in US tariffs. Swedbank expects the Swedish economy to grow by 1 per cent in 2025, and that growth will pick up to 2.3 per cent and 2.2 per cent in 2026 and 2027, respectively.  

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 

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