Sweden’s Economy Shows Resilience Amid 50% Surge in Oil Prices, Growth Expected to Continue

Sweden’s economy is displaying robust resilience despite a significant 50% rise in oil prices since early 2026, largely driven by the conflict in Iran. According to a new forecast from Länsförsäkringar (LF), GDP growth is projected at 2.9% for 2026, only slightly reduced by a tenth compared to previous estimates. Alexandra Stråberg, LF’s chief economist, highlights that increased household disposable income will help maintain this economic momentum despite elevated energy costs.

Inflation is expected to average 1.3% this year, up from earlier forecasts of 0.8%, influenced by rising oil and electricity prices alongside a reduction in food VAT. The forecast assumes oil prices will stabilize and decline later this year, but prolonged high prices could pose more serious risks to the economy.

The labor market is also improving, with unemployment projected to drop from 8.8% in 2025 to 8.2% this year, and further to 7.3% in 2027, though structural challenges remain, including underemployment and an anticipated baseline unemployment rate around 7%. The Riksbank is expected to hold interest rates steady at 1.75% in 2026, increasing slightly to 2.00% next year.

Despite uncertainties linked to energy prices, LF’s updated forecast paints a picture of steady recovery and resilience for Sweden’s economy this year and beyond.