Sweden’s Economy Shows Clear Signs of Recovery with Revised Growth Forecasts

Sweden's economy is demonstrating a robust recovery after a slow start to 2025, supported by domestic demand and public investments, according to statements from Finance Minister Elisabeth Svantesson and recent government forecasts. The government revised the GDP growth forecast for 2025 upward from 0.9% to 1.6%, and expects a 3.0% increase in 2026, slightly below earlier predictions. This improvement is attributed to rising household incomes and pent-up consumer demand driving increased consumption for five consecutive quarters, alongside stronger export growth than expected.

Key factors sustaining the recovery include increased household consumption, expanding public sector investments, and a projected rise in business investments. Despite these positive trends, the labor market remains a concern with high unemployment, though Svantesson anticipates the unemployment rate will start to decline in early 2026 as labor demand grows.

Svantesson highlighted the government's active role in facilitating this recovery through fiscal policies aimed at enhancing purchasing power and boosting public spending: “Now the recovery in the Swedish economy is underway. By ensuring that everyone has more money in their pockets, while also investing in public consumption, fiscal policy supports the recovery, and the recession is expected to be over by 2027.”

However, risks persist. These include uncertainties stemming from U.S. import tariffs, elevated trade tensions, and concerns about the German economy and global debt levels, which could impact Sweden’s growth trajectory. The Swedish Trade Union Confederation (LO) echoed apprehensions about the slow pace of unemployment reduction and ongoing job market challenges. Additionally, pension issues remain contentious, especially for those nearing retirement.

On the global stage, the economy has outperformed earlier expectations despite trade policy uncertainties, contributing to Sweden’s improved outlook. The government is optimistic that stronger domestic demand, supportive fiscal measures, and investment growth will maintain momentum into 2026 and beyond, potentially ending the recession by 2027.

Overall, Sweden’s economic recovery is gaining traction, but cautious monitoring of international economic risks and domestic labor market challenges is essential to sustain this positive development.