The Swedish economy has entered a prolonged recession, with the country’s GDP decreasing in the first quarter of 2025. However, despite the challenges posed by geopolitical uncertainty and low demand for labor, conditions for recovery are showing promise.
According to Minister for Finance Elisabeth Svantesson, the latest economic forecast from her ministry suggests that rising real wages and lower interest rates will help drive momentum towards recovery in the second half of 2025. Households have a pessimistic view of the economy, but their optimism is tempered by concerns about the impact of global economic uncertainty.
- Rising real wages are expected to continue to increase in 2025, providing households with more disposable income and boosting consumer spending.
- Interest expenses are also expected to decrease, reducing the burden on households and businesses.
- Fiscal policy is expected to play a key role in supporting households through the recovery process.
The economic recovery is expected to accelerate in 2026, with higher anticipated GDP growth driven by increased household consumption and investments. However, the recession is likely to continue into 2027, according to the Ministry of Finance’s new forecast.
Geopolitical uncertainty has had a significant impact on the global economy in the first half of 2025, causing stock markets to fall and US government bond yields to increase. The US administration’s policies, particularly the trade war, have created major uncertainty in the global economy. This has also affected Sweden’s most important trade partners, leading to subdued growth and reduced exports.
Despite these challenges, Swedish exports are expected to perform relatively well compared to global economic developments. Minister Svantesson notes that the recovery that began late last year has been interrupted, but conditions for resuming it are good.
“The US administration’s policies, and particularly the trade war, have created major uncertainty in the global economy,” she says. “This also affects the Swedish economy. The recovery we were seeing late last year has been interrupted and the recession has been drawn out further.”
In conclusion, while the Swedish economy faces significant challenges, conditions for recovery are showing promise. Rising real wages, lower interest rates, and fiscal policy support are expected to drive momentum towards recovery in 2025, with the economic recovery accelerating in 2026.
Source: Ministry of Finance