OECD Forecasts Strengthening Swedish Economy from 2026 with Rising Growth and Lower Inflation

The Swedish economy is projected to gain momentum starting in 2026, supported by strong domestic demand, fiscal stimulus, and stable monetary policy, according to the latest OECD Economic Outlook released on December 2, 2025. The OECD revised its GDP growth forecast upward to 2.6% for 2026, compared to 1.6% in 2025, before a slight moderation to 2.3% in 2027. These forecasts closely align with the European Commission's autumn projections, which estimate growth of 1.5% in 2025, 2.6% in 2026, and 2.3% in 2027.

Unemployment is expected to gradually decline from 8.7% in 2025 to 8.6% in 2026 and further down to 8.2% by 2027, reflecting modest improvements in employment and a steady labor market. Inflation, measured by the consumer price index with fixed mortgage rates (KPIF), peaked at 2.8% in 2025 but is forecasted to fall to approximately 1.1% in 2026 due in part to temporary tax cuts, before settling back to the Riksbank's target of 2% towards the end of 2027.

The OECD notes that the end of monetary easing in October 2025, after rate reductions from 4% to 1.75%, will likely result in the Riksbank holding the policy rate steady through 2026 before it gradually rises to 2% by the end of 2027. Despite positive domestic factors, Sweden’s open economy faces global headwinds from weak demand in the Eurozone and the US, heightened trade tensions, and challenges affecting exports, particularly in the automotive and steel sectors. Strengthening of the Swedish krona and declining global commodity prices have helped ease inflationary pressures.

Fiscal stimuli, including investments in housing and infrastructure, alongside improving household consumption, are expected to further boost economic recovery. However, risks remain, such as prolonged high precautionary savings, weaker external demand, or additional trade barriers potentially slowing the pace of recovery and straining public finances. Upside potential exists if consumer confidence rises faster than anticipated and inflation falls more quickly.

Overall, the OECD paints a cautiously optimistic outlook for Sweden’s economy, expecting a robust recovery trajectory beginning next year with gradual improvements across growth, inflation, and employment.