Swedish Economy Poised for Strong Recovery in 2026 Amid Risks from US Tariffs and Greenland Crisis

Sweden's economy is entering a much-anticipated recovery phase in 2026 after three years of weakness, buoyed by rising household consumption, investment growth, and stable inflation. Major Swedish banks including Handelsbanken, Swedbank, Nordea, and DNB Carnegie project GDP growth ranging from 2.6% to 3%, signaling optimism despite geopolitical risks.

Handelsbanken forecasts a calendar-adjusted GDP growth of 2.7% for 2026, up from its previous 2.4% estimate. The bank highlights robust household consumption, supported by income growth, and strong investments in machinery and defense materials as key growth drivers. Swedbank echoes this optimism, projecting 2.6% growth, with an expansive fiscal policy further stimulating consumption and investments. Nordea foresees even higher growth near 3%, driven primarily by rising real wages and fiscal stimuli lifting household spending.

Unemployment is expected to decline, with Swedbank forecasting a decrease to 7.8% by the end of 2027. Housing prices are anticipated to remain stable, with a modest 4% rise forecast for 2027. Inflation is predicted to stay low throughout 2026, thanks to falling food prices and reduced cost pressures, allowing the Riksbank to maintain interest rates until late 2027.

However, economists caution that risks are mounting. The United States' threats of punitive tariffs on European countries, including Sweden, amid tensions over Greenland could disrupt export resilience and dampen growth. While Nordea's Annika Winsth believes Swedish households will not decrease spending despite uncertainty, Handelsbanken and Swedbank warn that prolonged geopolitical conflicts may lead to increased savings and reduced consumption.

Experts predict a quick de-escalation of the Greenland crisis but acknowledge that ongoing uncertainty could slow the economic rebound. The potential for escalating trade conflicts remains a key concern alongside possible overheating as expansive policies and stronger consumer activity coincide.

Overall, Sweden’s economic outlook for 2026 is positive with significant growth expected, supported by domestic factors and fiscal policy. Yet, the interplay of international tensions and trade risks calls for cautious optimism moving forward, with policymakers and businesses closely monitoring developments.