Swedish Economic Growth Projections Slashed Amid Tariff Uncertainty
KI revises Sweden's economic growth projections downward for 2025, citing U.S. tariff uncertainties.
Key Points
- • Sweden's GDP growth projected at 0.7% for 2025, down 0.3 percentage points from prior forecasts.
- • Economic recovery may rely more on domestic demand due to weakened exports.
- • Unemployment expected to stabilize at 8.7% in 2025, showing slight improvement.
- • A reform space of 34 billion kronor is identified for upcoming budget considerations.
The Konjunkturinstitutet (KI) has released a new report projecting significantly lowered growth rates for the Swedish economy in 2025, impacting the economic outlook for the coming years. According to the latest update, Sweden's GDP is expected to grow by only 0.7 percent in 2025, marking a decrease of 0.3 percentage points from previous forecasts. For 2026, a better forecast of 2.6 percent growth has been offered, but this follows a period of stagnation which has raised concerns over the economy's overall health.
The report cites ongoing uncertainty surrounding U.S. tariff policies as a major factor contributing to the slowdown in growth. This uncertainty has negatively affected Sweden’s export market, which is especially vulnerable given its reliance on international trade. KI indicates that the slow growth in exports is a direct result of these external pressures, creating a challenging environment for Swedish businesses operating overseas.
Moreover, as a complement to these external factors, domestic conditions are showing signs that internal demand could become increasingly important for economic recovery. The report notes that a stronger domestic demand could help counterbalance the adverse effects of international uncertainties, particularly in light of a subdued global economic climate.
In terms of the job market, the unemployment rate is expected to reach 8.7 percent this year, slightly improved from earlier projections, suggesting a modest stabilization in employment conditions. Furthermore, KI has identified a potential budgetary reform space of 34 billion kronor, which has remained unchanged from previous estimates, indicating some room for fiscal maneuvers to stimulate the economy going forward.
In summary, while the forecast for 2025 presents a bleak outlook characterized by slow growth numbers and impacted exports due to foreign policy uncertainties, there are hints that bolstering domestic demand could provide a pathway towards recovery in subsequent years.