Handelsbanken Forecasts Robust Swedish Economic Growth and Interest Rate Hike by December 2026

Sweden's economy is on an upswing, with Handelsbanken revising its GDP growth forecast for 2026 to 2.6%, up from 2.1% earlier in the year. The growth is driven by rising investments in sectors such as defense, artificial intelligence, energy, and infrastructure, alongside a stronger household economy and increasing business demand. However, growth projections for 2027 and 2028 have been adjusted slightly down to 2.4% and 1.8%, respectively.

Unemployment is expected to improve steadily, projected to decline to approximately 7.5% by the end of 2028. Real wages for households are set to rise by an average of 2.2% this year but will moderate to just above 1% in the following two years. The labor market recovery is further supported by increased entrepreneurship and a drop in bankruptcies, although bankruptcy rates remain relatively high.

The housing market presents a mixed picture: prices are forecasted to grow by nearly 6% in 2027 and close to 4% in 2028 despite challenges like high construction costs and slower population growth. Consumer confidence is buoyed by rising purchasing power, although disparities between income groups and age demographics persist.

Monetary policy is tightening as the Riksbank is expected to raise the policy interest rate to 2.25% in December 2026 to combat underlying inflation pressures, following two incremental increases. Christina Nyman, Handelsbanken's chief economist, cautions that households and businesses should prepare for a slightly higher interest rate environment, though significant hikes are not anticipated. The Swedish krona is also predicted to strengthen against the euro, with a forecasted exchange rate of 10.60 kronor per euro by late 2027.

In sum, Sweden's economy has shown resilience amid global uncertainties, with diverse growth drivers, improving labor market conditions, and cautious but upward movements in interest rates signaling a cautiously optimistic economic outlook for the coming years.