Diminished growth prospects in wake of war but recovery expected to continue

Sweden’s growth rate is not as strong as expected at the beginning of the year. Due to heightened insecurity globally and households’ pessimism about the economy, the growth rate is expected to remain somewhat subdued in the first half of 2026. 

The 2026 forecasts for GDP and employment have been revised downwards. The Ministry of Finance’s assessment is that the economic downturn will be more prolonged than the forecast made in April. 

Geopolitical and trade policy uncertainty continue to make an impact. Higher energy prices contribute to higher inflation worldwide and confidence among households and businesses in Sweden’s neighbouring countries has waned. Lower global demand is expected to affect Swedish exports, and global insecurity has also increased the risk of inflation in Sweden. However, thanks to low inflation outcomes and reduced value added tax on food, Consumer Price Index inflation is expected to be low in 2026. 

“The Iran war has contributed to great uncertainty in the global economy and caused disruptions. This affects the Swedish economy, even if we are better positioned than many other countries, thanks to our low central government dept and our relatively low dependence on fossil energy. Growth has lost a bit of momentum but the Swedish economy is still expected to enjoy a higher growth rate in 2026 than the US and the Euro Area average. We are ready to take further measures to support the economy if the situation deteriorates,” says Ms Svantesson.