Swedish Economy Accelerates in 2026 Amid Rising Consumption and Investment

Sweden's economy is poised for a strong recovery in 2026, with Handelsbanken forecasting a robust GDP growth of 2.7%, up from earlier estimates of 2.4%. This positive outlook follows three years of subdued economic performance and is driven by increased household purchasing power, rising business investments, particularly in defense and artificial intelligence (AI), and resilient export markets despite global uncertainties.

Households in Sweden are expected to enjoy over 3% growth in real incomes this year—the highest in a decade—with consumption rising largely in line with income gains. Investments have notably surprised on the upside, especially in machinery and defense sectors, which are also benefiting from increased public spending. AI is anticipated to be a significant driver of economic transformation over the next decade, though economists warn of a potential net job displacement of 150,000 positions, balanced by an equal number of new roles created.

Export markets have stayed stable despite looming geopolitical risks. The potential imposition of U.S. tariffs on European countries, including Sweden, related to tensions over Greenland, remains a key concern. Handelsbanken and Swedbank both caution that these developments could escalate into a trade conflict, dragging growth down and increasing inflation through import cost pressures if worst-case scenarios unfold. Nonetheless, the main forecast assumes a swift resolution, maintaining the growth prediction.

Inflation is expected to remain low in 2026, supported by falling food prices and subdued cost pressures. This environment permits the Riksbank to delay interest rate hikes until 2027, facilitating continued economic momentum. The Swedish Krona is projected to strengthen against the dollar due to improved growth and market conditions, while housing prices are forecasted to rise by around 6% annually through 2027.

Christina Nyman, Handelsbanken's chief economist, emphasized the resilience of Sweden's economy amid geopolitical challenges: "Despite tensions, 2026 will be a year of recovery with strong household consumption and business investments supporting growth." Meanwhile, Swedbank's Mattias Persson highlighted the importance of global security and trade stability, warning that escalating conflicts could disrupt positive trends.

Overall, Sweden stands out among European peers with expected top-tier GDP growth, driven by broad-based economic improvements and cautious optimism in the face of external risks. The economy's trajectory over the next few years anticipates moderation to 2.2% growth in 2027 and 1.7% in 2028 as the recovery stabilizes and fiscal policies normalize.