Sweden's Economy Shows Early 2026 Signs of Recovery Amid Inflation and Housing Market Concerns

Sweden's economy is showing promising signs of recovery in early 2026, driven by supportive financial policies and improving purchasing power despite ongoing uncertainties. The latest economic report by Teknikföretagen and Industriarbetsgivarna highlights a positive shift with lower inflation and interest rates helping to reduce costs for households while key sectors like technology and basic industries begin to rebound.

Aino Bunge, first deputy governor of the Riksbank, confirmed this recovery trend during a recent BoPol Live seminar in Stockholm. She noted that the economy started regaining strength last year, with inflation expected to decline significantly in 2026, helped partly by a temporary reduction in food VAT. Nevertheless, she cautioned about underlying inflationary pressures, particularly from electricity prices, and emphasized the need to monitor developments closely.

The Riksbank has maintained its policy rate at 1.75% for now, reflecting a cautious optimism amid geopolitical uncertainties that could still affect economic outcomes. Bunge also spotlighted challenges in the housing market, where prices and investments have declined. She warned against proposed relaxations to mortgage regulations, particularly those lacking income-based limits, which could increase risks from high household debt. Maintaining resilience in the housing sector remains crucial as the economy recovers.

While this economic improvement marks a recovery from previously low levels, the report urges long-term reforms to promote sustainable growth and address disparities across sectors. The combination of stabilizing inflation, steady financial policies, and cautious housing market regulation form the foundation of Sweden's early 2026 economic outlook.