Konjunkturinstitutet Predicts End to Recession in Sweden by 2027 with Stronger Growth and Rising Inflation

The Swedish economy is set to recover robustly, according to recent forecasts by the Konjunkturinstitutet (KI). They have raised their GDP growth forecast for 2026 to 2.4%, up from the previous 2.2%, and project an even stronger growth of 2.8% for 2027. KI predicts that the current recession will conclude by 2027, supported by a consistent upward trend in household consumption despite cautious spending in the second quarter.

Unemployment is forecasted to remain high at around 8.6% this year but is expected to decline gradually to 7.9% in 2027 and 7.2% the following year. Alexandra Stråberg, KI’s chief economist, highlighted that while purchasing power is strengthening, these benefits are unevenly distributed, with vulnerable groups such as the unemployed not fully sharing in the recovery.

Inflation, measured by the KPIF index, is projected to rise from 1.3% this year to 2.1% in 2027. KI warns that inflation will exceed 2% next year even without factoring in volatile energy prices and tax changes. This outlook has prompted expectations that the Riksbank will increase its key interest rate by 0.25 percentage points later this year and again next year, potentially reaching 2.75% by the end of 2028.

Finance Minister Elisabeth Svantesson credits government policies for the positive economic momentum, citing measures to make food and fuel more affordable and a shift in consumer confidence as drivers of growth. Although inflation is currently low, she downplays concerns of rising inflation, emphasizing the government's cautious approach. However, opposition parties express concern over a 100,000 increase in unemployment during the current government’s term.

Meanwhile, the government also projects a budget surplus of around 95 billion kronor for 2027-2030, which may support continued fiscal stability.

In summary, Sweden’s economy appears to be emerging from recession with stronger GDP growth and improved household consumption on the horizon. Nonetheless, challenges remain with elevated unemployment and inflation pressures likely to influence monetary policy decisions in the near future.