Swedish Economic Growth Projected to Slow in Coming Years Amid Rising Inflation and Global Risks

The Swedish economy, which has shown robust growth in 2026, is projected to slow down in the coming years due to rising inflation, increased interest rates, and various global risks, according to recent economic forecasts from major Swedish banks. Swedbank's Economic Outlook report details a predicted GDP growth of 2.6% for 2026, but anticipates a deceleration to approximately 2% annually thereafter. Meanwhile, SEB forecasts slightly higher growth rates, projecting 3% GDP growth for this year, followed by a slowdown to 2.5% next year.

Swedbank chief economist Mattias Persson highlighted that improving household finances and a strengthening labor market, which is expected to reduce unemployment to 7.6% by the end of 2028, will be tempered by rising inflation and tighter monetary policy. Inflation is expected to rise due to higher energy and commodity prices, with underlying inflation forecasted to reach 2.5% by spring 2027. Against this backdrop, the Riksbank is set to raise its key interest rate to 2.25% in February 2027.

SEB's chief economist Jens Magnusson pointed to high electricity prices, escalating interest rates, and ongoing global crises as factors likely to constrain economic growth. Additional risks highlighted by Swedbank include an escalation of conflict in the Middle East, a slowdown in AI investments, new trade barriers, and growing public finance concerns in Europe.

The housing market, having seen prices rise by over 3.5% this year, is also expected to cool, with growth slowing to around 2% during 2027-2028. Despite these challenges, Swedbank maintains an overweight stance on equities due to strong stock market fundamentals.

Overall, these forecasts paint a picture of a Swedish economy that is transitioning from strong post-pandemic recovery to a more moderate growth phase, influenced significantly by domestic inflationary pressures and global uncertainties.