Sweden: Siltanews – News Desk
The economy is expected to grow modestly by 0.6% in 2024, followed by stronger growth of 1.8% in 2025 and 2.8% in 2026. Private consumption will recover from late 2024, supported by reduced debt servicing costs, rising real incomes, and improvements in the labour market. Inflation is set to remain below target until mid-2026. Private investments will be bolstered by gradually easing credit conditions and construction costs, and external demand. Unemployment is expected to decline steadily as labour demand rises.
The Riksbank has appropriately accelerated monetary policy easing amid rapidly falling inflation and weak domestic demand. The planned slightly expansionary fiscal stance will provide further support to the economy. Tapping into underutilized labour resources is needed amid an ageing population and high long-term unemployment. Structural reforms, such as relaxing rent controls and streamlining land-use planning to make housing more affordable in high-demand areas, would help improve labour market efficiency and matching.
Economic activity remained subdued in the first half of 2024, with contractions in both private consumption and investment. Recent indicators, including monthly GDP, the preliminary third-quarter GDP estimate, and industrial production, suggest this sluggish trend continued into the third quarter. Inflation measured by the consumer price index with a fixed mortgage rate, the key metric for the Riksbank, remains low at 1.5% in October after falling sharply in June 2024, due to declining commodity prices.
Despite easing inflation and interest rates, household finances remain tight, prompting them to prioritize saving over spending. The construction sector continues to struggle with elevated borrowing costs and a tepid housing market, even as housing prices ticked up. Labour market conditions have weakened, with rising unemployment and fewer vacancies, although labour shortages persist in some sectors, including education and healthcare. However, forward-looking indicators, such as companies’ hiring plans and business confidence, point to a gradual recovery.