Swedish Economy Shows Signs of Recovery Amid Challenges, Focus on Energy and Consumption Policies

Sweden's economy in early 2026 is showing promising signs of recovery after years of sluggish growth and recent strains from high inflation and rising interest rates. Handelsbanken reports a positive outlook with a 2.4% year-on-year rise in the GDP indicator and a 2.5% increase in household consumption, signaling broad-based economic expansion and improving consumer confidence. The Konjunkturinstitutet supports this view, noting increased consumption over the last four quarters and expecting inflation to drop below 2% next year, helped by tax cuts on food and electricity.

Despite this optimism, challenges remain. Mikael Damberg, the Social Democrats' economic policy spokesperson, stresses urgent need to address electricity prices, a key factor hindering investments and job creation. Damberg highlights that households face rising costs for essentials such as food, housing, and medications, especially impacting vulnerable groups like the elderly and families with children. He argues that a long-term agreement on Sweden’s energy system is essential to ensure economic stability and stimulate industry and housing investments.

Finance Minister Elisabeth Svantesson describes the economy as "Trump-proof," prepared to withstand external shocks like US tariff threats due to Sweden's robust public finances. The government is implementing reforms, including VAT reductions on food and new tax cuts aimed at boosting disposable incomes to stimulate consumption. However, some experts remain cautious; former Danske Bank chief economist Michael Grahn warns that global uncertainties may persist, possibly necessitating interest rate cuts to maintain momentum. There are concerns that many Swedes may opt to save rather than spend, potentially dampening the effectiveness of stimulus measures.

In summary, Sweden's economic outlook balances cautious optimism with clear policy priorities focused on stabilizing energy costs and encouraging consumption to sustain growth moving forward.