Disappointing Q2 2025 GDP Growth Raises Concerns Over Swedish Interest Rates
Sweden's Q2 2025 GDP growth falls short of expectations, increasing speculation about potential interest rate cuts by the Riksbank.
Key Points
- • Sweden's Q2 2025 GDP grew by only 0.9%, below the expected 1.4%.
- • Economic stagnation is noted by analysts, with Q2 growth compared to Q1 at just 0.1%.
- • Rising tariffs and household caution are influencing economic performance and inflation-related decisions.
- • Debate rises over whether the Riksbank will implement interest rate cuts in response to the sluggish growth.
Sweden has reported disappointing economic growth for the second quarter of 2025, with the Gross Domestic Product (GDP) rising by only 0.9% compared to the same quarter in 2024. This figure, released by Statistics Sweden, is notably lower than the market expectation of 1.4% growth, prompting concerns about the overall health of the economy and potential impacts on monetary policy decisions by the Riksbank.
The growth rate over the previous quarter was particularly stagnant, with only a 0.1% increase when seasonally adjusted, indicating that the economy may have effectively stagnated throughout the first half of the year. Torbjörn Isaksson, chief analyst at Nordea, described the latest GDP figures as disappointing but not alarming. He noted that a careful interpretation is warranted as the final numbers for Q2 will be confirmed in August, adding that signs for a recovery remain possible despite the slow growth.
Alexandra Stråberg, chief economist at Länsförsäkringar, also expressed concerns about the sluggish domestic economic activity and noted that rising tariffs on Swedish exports to the United States could further affect economic performance. She emphasized that while inflation has been on the rise, complicating the situation for potential monetary easing, the economic environment would benefit from rate cuts later this year to stimulate growth.
Adding to the cautious sentiment, Susanne Spector from Danske Bank pointed to the behavior of Swedish households. She believes that household caution is contributing to the weak economic performance, potentially reflecting deeper concerns over the economic outlook.
Currently, analysts are divided on what these economic indicators mean for future interest rate policies. While some, like those at Nordea, predict the Riksbank will maintain interest rates amidst rising inflation, others suggest that if growth sluggishness continues, the central bank may need to consider rate cuts to support the economy. As economists assess implications of these disappointing figures, the focus remains on how the Riksbank will navigate its upcoming policy decisions in response to the dampened economic forecast.