Geopolitical Uncertainty Challenges Sweden's Economy Amid Signs of Recovery

Sweden's economy faces significant challenges amid global geopolitical tensions and economic uncertainty. Tomas Sjögren, a researcher in public economics, highlighted these issues ahead of the Perspectives conference on November 13, 2025, focusing on "Geopolitical and Economic Uncertainty." Sjögren emphasized the influence of US politics, noting the current administration's disruption of bipartisan cooperation and the large federal budget deficit raising concerns about the US's financial stability. This situation threatens investor confidence worldwide and impacts Sweden's export-driven economy heavily reliant on stable global markets.

Trade wars initiated by the US, including tariffs on imports from China, the EU, and Mexico, jeopardize Swedish businesses, with the risk of job losses if high tariffs persist. The war in Ukraine has further strained trade relations, particularly with Russia, affecting energy prices within Sweden. Sjögren explained that increased military spending, projected to rise by nearly 13 billion kronor in 2025 compared to 2024, diverts funds from essential sectors such as healthcare and education. The COVID-19 pandemic also exposed vulnerabilities in global supply chains, prompting discussions about increasing Swedish self-sufficiency; however, full independence is unrealistic given cost and import dependencies.

Despite these headwinds, economist Isaksson from Nordea notes that the Swedish economy, while "somewhat unwell," is recovering from years of sluggishness and recession-induced caution. Households have saved at record levels due to high interest rates, which previously hindered growth, but upcoming measures including interest rate reductions aim to stimulate economic activity. Isaksson anticipates unexpectedly high economic growth in the coming year, signaling a hopeful outlook amid ongoing geopolitical and economic complexities.